Mothercare boss Ben Gordon has warned mounting pressures on the high street are likely to result in further store closures across the retail sector as he revealed Mothercare is to shed a quarter of its UK stores.
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Gordon said: “The high street has lost a lot of traffic to out-of-town and the internet. We’ve seen some high streets deteriorate, yet at the same time rental rates have continued to go up. Where it will end I don’t know. It’s all about rent.”
He warned Mothercare will not be the only retailer closing down high street stores in the face of rising rents and decreasing footfall.
Gordon said Mothercare was taking “a quantum leap out of the high street” because so many of its leases were expiring in the next two years.
80 of the 110 closures, predominately Early Learning Centres, will be stores where leases have expired.
It will pay £5m to shed the remaining 30 stores and is renegotiating leases on a further 40.
The move will cut costs by £18m per year and will add £4m to £5m to profits according to the retailer.
By March 2013, Mothercare will have reduced its UK stores from 373 to 266, of which 164 will be in-town.
To offset the reduced store numbers, the maternity retailer plans to grow its online business, which accounted for 22% of sales in its last financial year. It wholesale business rocketed 350%.
The retailer currently sells a selection of its products in 380 Boots stores. Gordon said the partnership has bolstered its presence on the high street and plans to expand it further this year.
The retailer is trialling new store formats for both Mothercare and Early Learning Centre over the next few months. The Early Learning Centres will have large play centres integrated into them.
Mothercare’s UK like-for-like sales dropped 4% in its year ending March 26. Its full-year group underlying profit plummeted 23.4% to £28.5m despite its soaring international business helping group sales rise by 3.6% to £793.6m.
The retailer is planning to open a further 150 international stores in its current year, including its first in South America, where it will debut in Columbia and Panama.
It expects to grow overseas retail sales by 15% to 20% this year. Total international sales were up 16.3% to £570.9m in its last financial year.