Mothercare today said it planned to sell its ELC toy business to The Entertainer for up to £13.5m. Multichannel toy retailer The Entertainer will then work with Mothercare to sell toys online and in its stores. The moves marks the latest phase of Mothercare’s ongoing transformation programme.
Mothercare, a Leading retailer in IRUK Top500 research, says that while it has a “solid presence” in the toy market through the ELC brand, it does not have the capital or resources to continue to develop own-brand ELC toys in a way that would be profitable. In the year to March 24 2018, the ELC business made revenues of £73.9m and profits of £1.1m.
Mark Newton-Jones, chief executive of Mothercare, said: “”We have made significant progress in recent months as we continue our strategic transformation to deliver a sustainable and profitable future for Mothercare.
”This disposal of Early Learning Centre provides a further step towards eliminating our bank debt, and our new concession arrangements with The Entertainer will bring our customers an even stronger Toys offer, both in stores and online. We look forward to working with the team at The Entertainer in the years to come.”
The sale comes as Mothercare continues to reshape its business in an ongoing transformation programme, and to move back into profit. By the end of March 2019, it aims to have 80 UK stores by the end of March – down from 137 stores in May 2018. It also aims to be free of bank debt by the end of this year. In December it sold and leased back its UK head office, gaining £14.5m, as part of this plan. It has also reshaped its organisation structure, resulting in fewer head office employees, and aims to save costs of £19m a year.
The Entertainer, a Top150 retailer in IRUK Top500 research, was founded in 1981 by husband and wife team Gary and Catherine Grant and today continues to be a family owned company. It sells through 163 stores and online through its TheToyShop.com website, which offers a 30 minute click and collect service and has 29m visits a year.
ELC was founded in 1974 as a mail order business that subsequently opened stores and was bought by Mothercare in 2007.
Commenting on today’s news, Catherine Shuttleworth, chief executive of shopper marketing agency Savvy, said: “News this morning that Mothercare have off loaded ELC to the toy retailer The Entertainer for £13.5m is another step in their turnaround programme. They bought ELC back on 2007 for £85m and it goes to show what a difference a decade has made. Still a good brand, it will be fascinating to see if The Entertainer will adopt it on product or in some retail capacity. The UK toy and play market has seen significant change over the last couple of years – with the abrupt exit of Toys R Us, the changed ownership of Argos plus the switch to online. It’s been interesting to see Smyth’s Toys and The Entertainer solidly develop their footprint in bricks and mortar retail as well as online. This move shows confidence in the market and some belief in continued growth.”
Image courtesy of Mothercare