Mothercare goes up the Swanee – will some local businesses follow it?

November 12th, 2019
12 November

Mothercare goes up to ten. Well, that was in the good old days. Now it has gone up the Swanee (here), hounded out of the high street by aggressive pricing, a slicker online presence from competitors and people having less money in their pocket.

This is the latest in a long list of household retail names that have gone into administration this year (here).

In Stoke, of course, it’s not great news either for other retail operations on Festival Park where footfall to Mothercare would spill over into Argos, Clarks and elsewhere. The last thing Festival Park needs are the lights going out in Mothercare.

It’s also sad that Mamas & Papas have also gone into administration (although the business is likely to survive through a pre-pack sale) on the back of Mothercare’s failure (here).

Last year, one in every 200 adults in Stoke-on-Trent became insolvent – the highest rate in England and Wales. Readers of this blog will know my concern that consumer insolvencies feed directly into greater vulnerability of local businesses, because I have banged on about it for ages.

But there is a wider picture. Recently, the IHS Markit/CPS purchasing managers’ index for services (here) fell to a six-month low of 49.5. It suggests the economy shrank 0.1% in the three months to September, after a 0.2% fall in the previous quarter – and the view of its economist Chris Williamson was that the UK now faces a heightened risk of recession.

Since then we have had Mothercare, Brexit chaos, a General Election announced and a month-long rail strike called for December.

Writing in the Guardian, Sofie Willmott, lead retail analyst at GlobalData, said: “Mothercare’s fall into administration comes as no surprise…” and then goes on to detail WHY it was not surprising.

The reasons, of course, were all to be found in the numbers – the profit warning, its CVA in 2018, online sales falling, prices too high compared to the competition and so on.

Right now, there are struggling local companies where an analysis of their corporate data – sales, profit margin, cash flow, balance sheet – may reveal a firm going under in the near future that could be saved NOW if the directors were to bite the bullet and take decisive action.

At ipd we not only crunch the numbers until we understand what the problem REALLY is and how best to solve it, we look at the whole picture around a business and how it might move forward. Tough times lie ahead but local businesses can survive them if they do the right things, right now.  Call us for a free initial chat if you (or one of your clients/customers) think you might be heading for the brink!