Mothercare enters examinership

An interim examiner has been appointed by the High Court to Mothercare Ireland, which employs 276 people in 18 stores across the State.

The aim of seeking court protection and examinership is to achieve a restructuring of the company, save as many jobs as possible, and minimise store closures, the company said. It cannot afford to support unprofitable stores, it added.

The company said it will trade as normal during the examinership process, staff and suppliers will be paid as normal, and all gift cards and family card points will be honoured.

Mothercare Ireland is a franchise of Mothercare UK and has traded here for 23 years. It is Ireland’s largest maternity, baby, nursery, and children’s clothes retailer.

Mr Justice Brian McGovern granted an application by Rossa Fanning, for Mothercare Ireland, for court protection and the appointment of Declan McDonald of PriceWaterhouseCooper as interim examiner.

The judge said he was satisfied the company, and two related companies, Mothercare World and Effleby Trading ltd, were entitled to protection and the appointment of an interim examiner. He made directions for advertising the petition and returned it for hearing on July 30. A significant source of the company’s difficulties is having to contend with rents that significantly exceed current market rents, the court was told. The company says the renegotiation and repudiation of rents will be a significant aspect of the examinership process.

Earlier, the judge queried if an interim examiner was necessary when Mothercare UK appeared to be the main supplier.

Mr Fanning said there are a number of other suppliers and having an interim examiner aids consumer confidence and communication with landlords. Having an interim examiner does not particularly increase the costs of examinership, he added.

The company was seeking a very short return date for the hearing of the petition which would also reduce costs, he said.

Counsel said Mothercare Ireland is a franchisee of Mothercare UK and is not a subsidiary of the latter or part of the same corporate group. It has debt obligations to Mothercare UK and has had to negotiate an extension of credit terms, he said.

Mr Fanning said Mothercare Ireland grew rapidly in the boom. It had four stores in 1993; in 2011 that number had increased to 24 stores. While the business had been affected by the downturn, it is still a €33m-a-year trading business with 276 employees, he said.

Counsel said there were numerous reasons for the company’s insolvency, including that its target audience is young families who have been particularly hit by the recession, with a consequent falloff in spending from that group. The company was also affected by discount stores selling baby and maternity wear.

High rents were a major factor and leases with high rents were entered into mainly with upward-only rent-increase clauses at the height of the boom, he said.

Mothercare said it was committed to doing everything it could to minimise store closures and to keep job losses to an absolute minimum but it cannot afford to support unprofitable stores.

“Many companies have successfully come through the examinership process in recent years and we are confident that we too will emerge as a more robust company which is better equipped to deal with the changing retail environment,” said owner David Ward.

Retail Excellence Ireland said the examinership, along with that of Best Menswear earlier this week, highlights the issue of high rents.