Mothercare Australia is going into administration. Photo: Graham Barclay
Voluntary administrators called in to assess Mothercare Australia’s financial operations say they expect to reach a decision about the maternity and childrenswear chain by next week.
Up to 400 jobs at 43 Mothercare, Early Learning Centre and Kids Central stores across the country could be affected by the decision, after Mothercare Australia reported it was going into administration following the collapse of its sale to the Myer family company.
A spokesman for the administrators said this afternoon that they were seeking to sell the business - as a whole or in part - as a going concern.
They had already sought out interested parties and were seeking expressions of interest, he added.
Earlier, Mothercare Australia said an agreement for the company to be sold to Myer Family Company Holdings on Tuesday was terminated by the Myer family company after some of the conditions set as part of the sale were "not fulfilled or waived".
"As a consequence of the termination of the sale agreement, the board of Mothercare Australia Limited has appointed Brian Silvia and Antony Resnickof BRI Ferrier as joint and several voluntary administrators," the company said in a statement to the ASX.
Mothercare Australia announced on November 14 that it had an agreement with the Myer family company to acquire its business. Its shareholders and noteholders of the company approved the sale on December 17, the company said.
As part of the proposed sale, Myer Family Company Holdings had agreed to provide $500,000 to Mothercare for use as short-term working capital after the retailer earlier said it would need to raise capital to maintain its Australian operations.
However, during the due diligence phase in December Mothercare flagged that the deal may not go ahead.
The company said that the voluntary administrators were "conducting an urgent assessment of the financial affairs of the companies" and that trading would continue.
The four arms of the business affected are Mothercare Australia, Skansen, Skansen KCG and Baby On a Budget.
UK-listed Mothercare plc, which has an indirect minority stake, said in a statement overnight that the Australian move would have "minimal" impact on its profits, and that there was no change in its "overall view of international profitability going forward".
The baby clothing and accessories retailer had made a £10.6 million ($16 million) write-down of its investment in the Australian chain in November.
Tough trading conditions
Mothercare said the loss was a result of restructuring and redundancy costs, an asset write-down and costs relating to the return of stock to suppliers. It also said it had been affected by tough trading conditions in Australia due to weak consumer demand and price wars with its rivals.
Meanwhile, Mothercare UK’s head Mike Logue was made redundant on Wednesday due to a ‘‘restructuring of senior management’’, London’s Daily Telegraph reported the company as saying.
The British retailer had posted a 7.4 per cent fall in third quarter total group sales, as recent improvements to its UK arm failed to drive Christmas sales.
The group, which has more than 1300 stores worldwide including 269 in the UK, said in mid-January that British like-for-like sales had fallen 5.9 per cent in the 13 weeks to January 12, while overseas underlying sales had risen 14.8 per cent.
Mothercare had been reducing its stores in the UK as part of a plan to turn the company around.
Mothercare Australia makes up 7 per cent of the UK firm's international retail sales, the company said.
with Reuters, AAP