As recently as May, having won approval for a CVA last year, Mothercare chief executive Mark Newton-Jones was bullish about the retailer’s turnaround prospects.

He said as he unveiled full-year results: “We have achieved a huge amount this year, refinancing, restructuring and reorganising Mothercare to ensure a sustainable future for the business. The majority of that work is now done.”

“What a difference a year makes,” enthused chair Clive Whiley. He said: “We remain determined to differentiate Mothercare as a textbook recovery case, in parallel demonstrating that boards can and should foster a greater alignment between their debt and equity providers.”

Up to a point, Lord Copper.

It now looks, sadly, as if they were wearing rose-tinted glasses. Mothercare’s UK business is now expected to be put into administration with the potential loss of 2,500 jobs.

Looming failure

The writing was on the wall. By the end of July 2019, when Mothercare posted its first-quarter update, it was clear the retailer’s troubles were ongoing.

The scythe had been swung on costs such as the store estate – 55 branches were shut through the CVA – but that also brought unwelcome, perhaps unanticipated, side-effects.

Shop closures hit online sales because click-and-collect locations disappeared, and the branches could no longer deliver sales on in-store iPads. In the first quarter, online revenues slid 12.1%. The total UK sales decline was 23.2%, largely down to the closure programme.

“While retailers bear unfair and punitive costs such as business rates, that is not the only reason that some fail”

At the same time, tough trading conditions meant Mothercare “revised” its expectations for the medium-term UK outlook and warned that full-year losses would be no less painful than in the previous year.

The looming failure of Mothercare’s UK business raises the question, once again, of whether CVAs simply delay the inevitable.

Last week, Carpetright, which also went through a CVA, revealed that it must find £80m to repay debt and fund the day-to-day running of the business. Its biggest shareholder and debtholder, Meditor, is considering making a takeover offer.

Arcadia tycoon Sir Philip Green, who also managed – just – to win support for a CVA, needs to rustle up £300m to pay off a loan secured on his Oxford Street flagship store.

No silver bullet

Such travails follow the demise of a host of retailers that hoped a CVA would save them, from Toys R Us to House of Fraser.

Landlords, many of which already question the merits of CVAs, must wonder whether it was worth taking the associated financial hit when the success of the mechanism has proved so patchy.

While retailers bear unfair and punitive costs such as business rates, that is not the only reason that some fail.

In the case of Mothercare, the CVA was no silver bullet. Other factors at play included the failure to make up the loss of online sales, the incursion by other retailers into its core categories and ultimately, a failure to engage with its target customer who could turn to all sorts of sources, including online forums such as Mumsnet, for specialist advice and recommendations.

“Landlords won’t want to be blamed for job losses”

On top of that, the CVA followed a breakdown in boardroom relations as Newton-Jones was ousted before being brought back little more than a month later.

Despite the poor track record of so many CVAs, landlords may still hesitate to swing the executioner’s axe by not backing them. They won’t want to be blamed for job losses.

But if they are unconvinced by turnaround plans, they will become increasingly prepared to dismiss retailers’ pleas. The alternative is empty premises, but that is what many landlords are being left with anyway – and Mothercare’s 79 UK branches could now be added to the list of voids.

Landlords will still approve some CVAs, but it will be on a case-by-case basis and only the most compelling will win support. That’s evident from the push-and-shove that accompanied Arcadia and Monsoon’s CVAs, and Mothercare’s inability to address its UK problems will further undermine faith in the process.

While the latest CVA failure may not be enough to signal the death knell just yet, in future, a thumbs-down from landlords must be increasingly likely.