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Mothercare to raise £100m to fund transformation into digital-first retailer

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Mothercare plans to raise £100m from shareholders, funding a strategy to transform itself into a digital-first retailer.

The business, led by chief executive Mark Newton-Jones, previously of Shop Direct Group , says that such an overhaul of the UK business would underpin future growth and unlock further value in its international business. Mothercare directors say there’s been a period of under-investment that now requires funding to reshape and modernise its UK stores as well as improving IT and ecommerce systems as well as infrastructure.

Mothercare trades online and through 1,500 Early Learning Centre and Mothercare stores in 60 countries.

Newton-Jones said: “We have set out our strategic plans for the turnaround of Mothercare and ELC in the UK. By modernising and transforming the UK into a digitally-led business supported by a modern store estate we will underpin the growth of the group’s successful International business. Our ambition is for Mothercare to become the leading global retailer for parents and young children. The support of our shareholders will allow us to deliver on this ambition. I am excited about the prospects for this company and the opportunity we have to provide great products, service and advice to our customers worldwide.”

Of the £95m to be raised, after costs, from a rights issue, about £25m will be spent on expanding its store closure programme, about £20m on refurbishing existing stores, and £10m on improving its digital offering and multichannel distribution. The remaining £40m would be spent on reducing the company’s overall debt.

The strategic rethink follows a period in which Mothercare’s UK sales have been falling. A drop in online sales has turned around but now attention is turning further towards its stores. In the year to March 29 2014, UK sales fell by 7.6% to £262.3m, compared to the same time last year, but online sales grew by 5% to £134.1m. Total worldwide network sales rose by 0.5% to £1.2bn, but total retail sales were down by 2.6% at £724.9m. Underlying pre-tax losses widened to £9.5m in the year.

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