LONDON (Reuters) - Baby goods retailer Mothercare (L:MTC) launched a 100 million pound rights issue on Tuesday to help fund more store closures and revamps, as it steps up efforts to turn around its loss-making British business.
While Mothercare's overseas business is profitable, fierce competition from supermarkets like Tesco (L:TSCO) and internet retailers like Amazon (O:AMZN) has hit it hard at home, leaving it with too many stores and not enough customers, and exposing a need to grow online and improve its product ranges and brands.
Mothercare Chief Executive Mark Newton-Jones has called the stores and infrastructure outdated and has moved to ease aggressive discounting in favour of full-price sales to rebuild gross margins.
The group said the fully underwritten 9 for 10 rights issue would be set at 125 pence per new share, a 49 percent discount to Monday's closing price of 248.25, or 34.2 percent after the theoretical take up of the rights issue.
The firm said 25 million pounds of the proceeds would be spent on closing stores, with 20 million pounds for modernising others and the remainder going towards improving IT infrastructure and reducing debt.
"By modernising and transforming the UK into a digitally-led business supported by a modern store estate we will underpin the growth of the group's successful International business," Newton-Jones said in a statement.
The group had previously said UK store numbers would fall to around 200 by the end of 2014/15 from 311 outlets in 2012.
(Reporting by Neil Maidment; Editing by Karolin Schaps and Susan Thomas)