November 4, 2019 / 8:39 AM / 15 days ago

Mothercare's problem UK child on brink of collapse

People walk past a Mothercare store in Altricham, Britain, May 16, 2018. REUTERS/Andrew Yates/Files

LONDON (Reuters) - Struggling baby products retailer Mothercare (MTC.L) is set to appoint administrators to its loss-making British business, putting about 2,500 jobs at risk and dealing yet another blow to the country’s beleaguered retail sector.

Mothercare’s UK sales have been hammered by intense competition from supermarket groups and online retailers as well as by rising costs. The group also has a profitable international business, with over 1,000 stores in over 40 territories.

Shares in the group were down 28% at 0859 GMT on Monday after it said it was clear the UK retail operations, which trade from 79 stores, were not capable of returning to a level of profitability that was sustainable for the group as it currently stands.

“Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK,” it said.

The group said notices to appoint administrators to its trading subsidiary, Mothercare UK Limited and to Mothercare Business Services, which provides services to Mothercare UK, will be filed with the court.

Notices of intent to appoint administrators give companies protection from creditors for ten days before potentially tipping into them into administration.

Mothercare said the company and its other subsidiaries were not covered by these notices and it will be free to continue to trade in the normal course of business.

In the year to March 2019, the Mothercare brand generated profits of 28.3 million pounds internationally whereas the UK retail operations lost 36.3 million pounds.

The stock was down 3.18 pence at 8.32 pence at 0859 GMT, valuing the group at 27.8 million pounds.

Reporting by James Davey; editing by Kate Holton

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