Mothercare’s inevitable demise

Mothercare's UK arm has gone into administration, But that's hardly any surprise.

Mothercare shop

In "one of the most highly anticipated collapses on the high street", baby-paraphernalia retailer Mothercare is to appoint administrators to its British business, reports Jonathan Eley in the Financial Times. While the listed company will continue to operate, thanks to its profitable international division, its shares still fell by nearly a quarter once the news was announced. While Mothercare still has a high market share in certain areas, supermarkets and online retailers have undercut its prices.

It's easy to blame a combination of "challenging market conditions', competition from Amazon and the like", says Sarah Vine in the Daily Mail. However, the truth is that "Mothercare was struggling long before any of these things were a real problem". It always seems to have been badly managed. As early as 2003 there were reports that "money at Mothercare was so tight bosses had to borrow cash from the tills to pay the wage bill". While the chain would experience a "brief resurgence" over the next few years, its fate was sealed by the decision to "wildly" expand overseas while closing down city centre stores in favour of "large, faceless out-of-town centres".

Mothercare's demise is a case study in how rarely company voluntary arrangements (CVAs), whereby troubled retailers persuade landlords to temporarily accept lower rents, as it recently did, actually work, says Jim Armitage in the Evening Standard. Only 12% of companies involved survive. They "represent the triumph of bosses' optimism over reality".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri