Maternity and babywear specialist Mothercare has announced the launch of a “more sustainable and less capital-intensive” business model which will take effect from the AW20 season.
It comes following successful talks with its franchise and manufacturing partners. “This new model results in our franchise partners contracting to pay for products directly to our manufacturing partners, thus removing the timing mismatch we were experiencing with the reduction in our payment terms and so improving the group’s working capital requirements,” the company said on Thursday.
“We believe this new way of working will ultimately have the added benefits of improving pricing for franchise partners, which in turn should better incentivise retail sales growth and assist our manufacturing partners in reinstating credit insurance for future seasons.”
Mothercare completes Boots franchise deal
The retailer also announced it has finalised its franchise deal with Boots, which was initially announced in December but was repeatedly delayed due to the Covid-19 pandemic. The deal will initially run in the UK and Ireland for 10 years.
The company also said it has entered into a new 20-year franchise deal with its biggest franchise partner, Alshaya Group. “We highly value this long-standing and continuing strong commercial relationship, and we look forward to contributing to an extended period of mutually beneficial partnership growth in the future,” the company said.
Mothercare’s UK business fell into administration in November and it closed all of its stores in January.
The company said it expects a 10 million pound hit from the administration.
In June, Mothercare announced it was downsizing its headquarters and is seeking new funding amid its ongoing restructuring. The company said at the time it “remains on track to become a profitable international franchise operation, generating revenues through an asset-light model, operating in around 40 international territories”.
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