Mothercare have announced it will launch a rights issue in the hopes to raise £100m to fund its ongoing turnaround plan.
The mother and baby retailer will be asking shareholders to raise capital to fund its move to a digital-led strategy to help pay off a “significant amount” of its debt.
Alan Parker who is CBE, chairman of Mothercare, has said: “This fund-raising is a pivotal step for Mothercare. It will position us for the next phase of our strategy, which is focused on returning the UK to profitability, reinforcing the strong growth potential in our International operations, and as a result, generate sustainable long-term value for Mothercare shareholders”.
Mothercare will continue to close lose-making stores as part of the turnaround strategy, planning to close at approximately 50-75 locations by the end of the next financial year.
Some Early Learning Centres are also set to be closed, however the company plans to trade in concession stands and online through the ELC brand.
£40m of net proceeds will be used for “the full repayment of the group’s existing term loan”. Meanwhile, the company has earmarked £20m to fund its store refurbishment programme with the closures estimating to cost approximately £25m.
The company’s turnaround strategy appeared to have stalled in January, when Mothercare issued a profit warning, as sales and shares slumped.
CEO Mark Newton-Jones, said: “We have set out our strategic plans for the turnaround of Mothercare and ELC in the UK. By modernising and transforming the UK into a digitally-led business supported by a modern store estate we will underpin the growth of the group’s successful International business.
“Our ambition is for Mothercare to become the leading global retailer for parents and young children. The support of our shareholders will allow us to deliver on this ambition. I am excited about the prospects for this company and the opportunity we have to provide great products, service and advice to our customers worldwide.”