Mothercare has asked its suppliers for concessions, Retail Week has learned, as it vies to claw back margin that has been hit by the price war in the sector.
It is understood that interim boss, former Shop Direct chief executive Mark Newton-Jones, has met with Mothercare’s major suppliers including Silver Cross, Britax and Maclaren to move payment terms to 90 days and secure a 2.5% settlement discount. At present, Mothercare suppliers are on a range of different payment terms.
Letters to all suppliers have been distributed this week.
A Mothercare spokeswoman said: “As part of the continuing work to improve our performance and in line with industry practice, our suppliers are being asked to play their part in helping to support the turnaround in UK profitability. In turn our suppliers will benefit from a strengthened UK business, as well as the continuing growth of our International operations.”
A source said that the move is part of a “root and branch review” of the business by Newton-Jones, who replaced Simon Calver after his departure earlier this year.
It is thought that getting Mothercare’s costs under control is high on Newton-Jones’ priority list as margins in its UK business are understood to have plunged.
Price cutting is rife in the sector as online giant Amazon and Kiddicare – which Morrisons is understood to be taking a £160m hit to offload - have discounted top brands. Mothercare has followed suit and margins have deteriorated by “double digits”, according to one source.
Mothercare, which is midway through a turnaround of its struggling UK business, issued a profit warning in January, a month before Calver’s departure, due to the “highly promotional” UK high street over Christmas.
In the 12 weeks to January 4, UK like-for-likes were down 4%. The retailer is due to unveil its full year results on May 22.