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Mothercare enters next phase of transformation

Mothercare is entering the second phase of its transformation programme to become a “digital retailer with a store estate”, chief executive Mark Newton-Jones told Drapers after the firm made its first underlying profit in the UK for six years.

Mothercare Little Bird by Jools Oliver

Mothercare Little Bird by Jools Oliver

Mothercare Little Bird by Jools Oliver

“This is a pivotal and watershed moment for Mothercare and the turnaround plan,” he said.

“Three years ago we were haemorrhaging money – up to £25m a year – and we’ve started to bring that under control,” he said. “Returning to profit allows us to enter the next phase of transformation where we can become a digital retailer with a store estate, rather than a bricks-and-mortar retailer with a website.”

The firm has closed more than 100 of its stores over the past four years and invested significantly in upgrading the ones it has left. It has now revealed plans to close a further swathe in the coming years.

“We had 250 stores at the start of the journey, now we have 150 and in the next four to five years I think we could have around 80-100 in major conurbations,” he said. “All stores will be in the new club format.”

He declined to name where stores would be closing but explained that the firm has now got an “agile store estate” with average lease length of five years.

Mothercare has refurbished 90 stores to date and 20 of those have been done to the “highest standard”, including stores in Manchester Fort, Warrington and Edmonton in north London.

Newton-Jones said the firm is trebling the amount it currently spends on staff training for employees in stores to enhance the focus on specialist advice. It currently spends around £50 per head for training for new starters, which will increase to around £200 per head over the next year.

Online sales increased by 7.8% year-on-year in the 12 months to 25 March, accounting for 41% of total UK retail sales. Mobile now accounts for around 83% of online traffic.

“Our customer is a 25-35 year-old mum and digitally enabled,” he said. “We now have a database of three million people, up from 150,000 a few years ago, and we’re using that data to make decisions on marketing, products, social – we want to be seen as trustworthy and become a source of advice and support.”

He said the firm will incentivise store managers to build the customer database further and it plans to host more experience evenings, where expectant parents can come to stores to learn about “essential baby products and key parenting topics”.

Newton-Jones explained that Mothercare has made great strides in improving and upgrading its product range, as well as adding more exclusive products – a strategy which he said befits a “specialist business”.

“Three years ago there was nothing in the home and travel ranges that you couldn’t get from somewhere else,” he said, explaining that home and travel accounts for 45% of the business.

“Now a third of what we offer is exclusive.

The retailer has also introduced ultrasound pregnancy scan specialist Babybond to around 20 of its stores, which Newton-Jones said could extend to 40 stores in future. “More than 30,000 soon-to-be mums have had scans with us already,” he said.

He said baby clothing collections such as the My K range with musician Myleene Klass and Little Bird with Jools Oliver, chef Jamie Oliver’s wife, are performing well, as is the Smile collection by Julien Macdonald. No new celebrity collaborations are in the pipeline.

The business is also taking “baby steps” towards building a wholesale business for its own branded product and believes this could be a big area for growth in future.

“So we have a partnership with Boots where some products are in 400-500 stores and ELC has just launched with Waitrose,” he said. “For clothing we have launched on Amazon and Zalando and we’re starting to grow from there.

“Our international wholesale business has grown by 38% in the last year, albeit from a low base.”

Internationally, Newton-Jones said the business is looking growth opportunities in India, China, Indonesia, Russia and mainland Europe, as well as launching into new territories online.

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