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Multichannel at the heart of Mothercare UK turnaround strategy

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Multichannel services are at the heart of a three-year turnaround programme for multichannel retailer Mothercare’s UK business, which gets underway today, according to its executive chairman Alan Parker.

The programme, which starts with the closure of 111 UK Early Learning Centre and Mothercare shops, will also see the launch of new combined online and in-store customer services, a new UK website and 30 overseas websites.

“Mothercare is a great global brand with strong international partners,” said Parker. “Today marks the beginning of a three-year turnaround and I am confident we will deliver a sustained recovery and long term success.”

The move comes at a time of falling UK sales, both online and off, for the nursery retailer. A fourth quarter trading update today showed UK sales fell by 9.5% in the 12 weeks to March 31, down by 8.2% on a like-for-like basis. Online Direct in Home sales were down by 3.2%. International sales were up by 18% and worldwide network sales by 4.5% but overall, group sales were down by 4.2%.

In the full year, UK sales fell 6.3%, or 6.2%, like-for-like, while Direct in Home sales were down by 3.4%. International sales, up by 16%, together with a 4.3% rise in network sales around the world, left global sales in positive territory, with a 0.7% rise.

Executive chairman Alan Parker today unveiled the first part of a strategy to transform the UK business over the next three years, while growing the international business. That will see the chain’s stores, which trade under the Mothercare and Early Learning Centre brands, reduced to 200 in the UK, 111 fewer than at present, as the company looks to focus on profitable stores, improved customer experience and on lean retail. The store estate, based on the company’s profitable stores, will include 95 out of town stores and 105 high street stores. In all there will be 173 Mothercare stores, and 27 Early Learning Centres. The store closure programme, which has already seen 62 stores closed, net, in 2012, is expected to improve UK profits by £13m by March 2015.

There will be a new UK ecommerce website, currently expected for the first half of the current financial year, and 30 new overseas websites, as well as multichannel services that combine online with store trading.

But at the same time the company will continue its international growth that last year saw 134 stores opened, net, outside the UK, taking its overseas holdings to 1,028 stores in 58 countries.

Finance for the turnaround programme, which is expected to cost £35m over the next three years, is coming from refinanced banking facilities from HSBC and Barclays.

“Today we have announced the framework of our decisive three-year strategy to restore the UK business back to profit and strengthen our foundations for growth,” said Parker. “This will see us operate a lean, more competitive business, focused on the existing profitable stores in a smaller UK portfolio, combined with a state of the art online platform. Our international business continues to perform strongly and we plan to further accelerate growth.

“We now have the cornerstones of our Transformation and Growth strategy in place.”

The strategy to March 2015 will be unveiled in full by new chief executive Simon Calver, previously of Lovefilm, who joins the business later this month, at the company’s full-year results announcement on May 24.

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