Mothercare joint venture collapses

MothercareMothercare Australia has collapsed into administration after talks to sell the business failed.

The company, which is an associate of London-listed Mothercare, has called in administrators after it could not reach an agreement to sell the business to the Myer Family Company, which is behind Australia's biggest department store chain.
Mothercare, which held a 23% stake in the joint venture and generates 7% of its international sales from Australia, had agreed to sell its holding in November following the deterioration of trading conditions in Australia.

It had hoped the Myer family as co-shareholders would inject cash into the business, which was set up in 2010 and has 74 Mothercare and Early Learning Centre shops.

Mothercare said the venture's collapse would have a "minimal" impact on profits, having set aside £10.6 million to cover the remaining value of its investment and other payments due from Mothercare Australia in November, operating on short payment terms since then.

Matthew McEachran, analyst at N+1 Singer, said there would be very little change to forecasts for the group as the statement suggested no royalties were being paid and there was no inclusion of future royalties in the forward plans.

He said: "Today's news is a disappointing to conclusion to what has been a fragile situation for some time.

"There still remains the possibility of an operator picking up the rump of the business out of administration and establishing a new franchise partnership.

"Clearly this scenario doesn't look likely after today's announcement, but the door is open for someone to pick up one of the market's leading players and cherry pick the stores in the estate."

Mothercare plans to grow profits in its international business as its scales back its UK operations. New boss Simon Calver was brought in last year and has set out on a cost-cutting plan to reduce its UK store numbers from 311 to 200 by 2015.

High Street casualties
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Mothercare joint venture collapses

Administrators sounded the death knell for Woolworths in December 2008, leading to store closures that left 27,000 people out of work. Since its collapse former Woolworths stores have become a blight in many town centres and more than 100 of the large stores still lay vacant in January 2012.

Loyal customers didn't have go without the family favourite store for long however as it reappeared online as in 2009, after Shop Direct Home Shopping bought out the Woolworths name.

The greetings cards specialist became the latest highstreet casualty in May with 8,000 jobs on the line when it was forced it into administration. Its biggest supplier, American Greetings, then bought Clintons out of administration and put the retailer through a rebrand including a new logo and complete in-store revamps.

Its contemporary format includes new fixtures and fittings and easier to navigate stores, and will be rolled out to all 400 UK stores at the cost of £16million. Bosses aim to bring the brand back to profit within two years.

Poor sales in the run up to Christmas was the final nail in the coffin for several struggling chains, including lingerie retailer La Senza, which went bust in January 2012 with 146 shops and 2,600 staff. Kuwaiti retailer Alshaya bought part of the business, which saved 60 shops and 1,000 staff.

La Senza has been struggling in a similar way to other specialist shops such as Game and Mothercare, which have been hit by cut-price competition at supermarkets and have no alternative products to help shoulder losses.

Stricken retailer Blacks Leisure, which employed 3,600 staff across 98 Blacks stores and 208 Millets stores, went into administration in Janurary 2012 after failing to find an outright buyer.

Soon after its stores were bought by sportswear firm JD Sports in pre-pack deal - an insolvency procedure which sees a company being sold immediately after it has entered administration – which saw most of Blacks' £36 million of debt wiped out.

Fashion chain Bonmarche, which was part of the Peacock Group, was sold in January when the group collapsed due to unsustainable debts, resulting in 1,400 job losses and 160 store closures. Private equity firm Sun European Partners bought 230 stores, which continue to trade with 2,400 staff.

Peacocks collapsed under a £740 million net debt mountain in January 2012 in the biggest retail failure since Woolworths. Despite being sold out of administration to Edinburgh Woollen Mill in a deal that saved 380 stores and 6,000 jobs, administrators from KPMG were forced to close 224 stores with immediate effect. This lead to 3,350 redundancies from stores and Peacocks head office in Cardiff.

The high street name continues trading as bosses work to stabilise the situation, yet a further blow was dealt this month with news that the firm's pension fund is in £15.8 million shortfall as a result of the collapse.

Game buckled under its £85m debt pile in March 2012 and was placed into administration after being unable to pay a £21m rent bill. Administrator PwC immediately closed 277 shops, with the loss of 2,000 jobs. Soon after, investment firm, OpCapita bought 333 Game stores, saving more than 3,000 jobs.

Game's demise followed a string of profit warnings and the failure of nervous suppliers, including leading names Electronic Arts and Nintendo, to go on providing the latest games, further damaging poor sales.


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