Caution: Mothercare said it could run out of cash if customers rein in spending
Mothercare has warned it could run out of cash if customers tighten purse strings too much during the cost of living crisis.
The baby goods retailer sounded the alarm despite swinging back to profit.
The AIM-listed group made £12million in the year to March – against a loss of £21.5million the year before.
The company, based in Hemel Hempstead, Hertfordshire, had to shut hundreds of stores in 2019 when it fell into administration. It is now run as a franchise business. In the UK it sells its goods, such as baby clothes, toys and bedding, through Boots.
Sales have been hit by its exit from Russia after the invasion of Ukraine.
But it also warned that if ‘trading conditions were to deteriorate’ beyond its most pessimistic forecasts and it could not cut costs to cope it might run out of cash at times.
At that point – what it described as a ‘sensitised scenario’ – there would be significant doubt over its ability to keep trading without new financing arrangements or debt waivers.
Mothercare is planning to hire its first chief executive since January 2020, when Mark Newton-Jones stepped down. Chairman Clive Whiley has since overseen a comprehensive restructuring.
Sales to franchise partners in Europe and Asia rose 7.5 per cent to £385million last year.
The company said it had ‘barely scratched the surface’ of all the opportunities.
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