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".

Recommended

The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Beyond the Brexit talk, the British economy isn’t doing too badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
14 Aug 2020
No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020

Most Popular

No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020
Inflation spiked in the US last month – is this the shape of things to come?
US Economy

Inflation spiked in the US last month – is this the shape of things to come?

Prices in the US rose much more dramatically than expected in July. Can we expect more of the same, and what does that mean for your money? John Stepe…
14 Aug 2020
The MoneyWeek Podcast: house prices, staycations, and the death of cash
House prices

The MoneyWeek Podcast: house prices, staycations, and the death of cash

John and Merryn talk about the rise in UK house prices and the fact that everybody is holidaying in the UK, plus gold's new highs, the death of cash, …
12 Aug 2020