MOTHERCARE PLC 
LONDON (Reuters) - Baby goods retailer Mothercare (>> Mothercare plc) said on Tuesday it would tap shareholders for 100 million pounds to help fund another raft of store closures and revamps, as it steps up efforts to stem losses at its core British business by 2017.
While Mothercare's overseas business is profitable, fierce competition from supermarkets like Tesco (>> Tesco PLC) and internet retailers like Amazon (>> Amazon.com, Inc.) 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.
The group's UK arm generates around 60 percent of revenue but has lost the firm 68 million pounds in three years.
Mothercare boss Mark Newton-Jones, who became permanent CEO in July after an interim spell, wants to reduce the group's UK store estate from 220 to 160 over the next three years and switch the majority to larger out-of-town formats.
Some 150 stores have already closed in the past three years.
"The mix of stores will change from 2/3 in town and 1/3 out-of-town to the polar opposite, so we are effectively closing smaller stores to open bigger ones," Newton-Jones told Reuters.
Shares in the firm, which has almost 1,500 stores in 60 countries operating on a franchise basis outside the UK, were down 5 percent at 235p at 1050 GMT.
"How many stores they have and the refurbishment programme is key but ultimately that is not going to turn the business around in itself.... whether Newton-Jones is successful or not is going to depend on the execution of the core proposition," said Peel Hunt analyst John Stevenson, who has a 'hold rating'.
Newton-Jones, who said shareholders were supportive of a rights issue he called a "pivotal moment" in the history of the business, said that larger stores would allow Mothercare to showcase more products and offer a greater number of services.
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.
In addition, Mothercare said it would spend 15-20 million pounds of capital expenditure a year on the turnaround plan.
Around 25 million pounds of the rights issue proceeds would be spent on closing UK stores, the firm said, with 20 million pounds for modernising others and the remainder going towards improving IT infrastructure and reducing debt.
As part of enhancing its digital offering, Newton-Jones said online photo and video content would be improved and that video walls would be brought in-store, together with iPads to give customers access to reviews. A customer database that can track births and personalise offers will also be used in-store.
(Editing by Karolin Schaps and Susan Thomas)
By Neil Maidment
