Shares in Mothercare (MTC) rallied 17% to 15.75p on Friday after the baby goods retailer inked a deal to supply products exclusively to Boots UK stores, thereby keeping its goods on British shelves.
Mothercare called in administrators to its ailing UK business last month and will close all of its UK brick and mortar outlets, so this new tie-up effectively salvages the brand’s UK presence.
Part of Nasdaq-traded Walgreens Boots Alliance, Boots will become the new exclusive franchisee of the Mothercare brand in the UK.
The high street chemist has a similar customer base to Mothercare and will be stocking Mothercare-branded clothing, home and travel products, the latter category including car seats and pushchairs. Mothercare’s range will be made available in larger Boots stores as well as online at boots.com.
SNUG FIT
Mothercare chief executive Mark Newton-Jones explained that ‘Boots is at the heart of one of the largest healthcare businesses in the world, and Mothercare will fit in as the specialist brand for parents and young children in both Boots stores and online.’
He insisted the announcement is ‘fantastic news for the brand and the millions of Mothercare customers across the UK. It is also great news for Mothercare and our wider group of stakeholders after what has been a tough period.’
AN UNUSUAL ADMINISTRATION
A toxic combination of competition from supermarkets and cheaper online rivals, rising costs and years of under-investment in its online offering ultimately did for Mothercare’s domestic high street chain, which entered administration last month.
Unlike most administration situations however, the retail group’s shares continue to trade on the stock market.
The reason is the Watford-headquartered company still has a profitable overseas operation and the administration does not affect the entire business. Traditionally an administration situation would see shares in the listed company suspended and then delisted.
As Mothercare explained in its recent half year results, the administration, and the transfer of the international franchise to a new legal entity and subsidiary, Mothercare Global Brand (MGB), ‘completes the transformation of our group into a capital light business which is expected to be both cash generative and profitable, focused on its global international franchise arrangements.’
