Mon, 22 Jul 2013 | BUSINESS SALE
Mothercare is reported to be looking into a sale of the Early Learning Centre (ELC) chain as part of its plans to restore its business to profitability.
Sky News revealed that the company has been in discussions with a number of potential advisers in recent weeks and although no decision has been formally made a sale is thought to be on the cards.
A trading update issued by Mothercare towards the end of last week confirmed that the retail company has been struggling recently: “The UK Market has been very competitive during the last quarter and we have continued to focus on delivering cash margin.
“In line with our plan, we closed a further 13 loss-making stores (four Mothercare and nine ELC) during the first quarter of the year.”
This has left the company with a total of 242 stores (192 Mothercare and 50 ELC) in the UK.
If the company does opt to look into a sale, Lazard is understood to be the preferred adviser for an appointment to handle the sale.
But while a sale of ELC would help Mothercare by cutting lose the loss-making business, it is highly unlikely that the business would be able to recoup what it paid for the firm. The company paid £85 million for ELC back in 2007 but a poor track record of performance and wider problems within the retail sector will make this a difficult price to hit now.
Despite this, distressed business investors are still expected to consider the business seriously, especially given that other retail turnarounds, such as that of HMV, look set to be success stories.
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