By Rupert Steiner
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Small suppliers are furious at moves by Mothercare to slash their payments in a desperate attempt by the baby-wares group to cut costs.
The High Street retailer is under huge pressure from the City to reverse a tide of profit warnings ahead of the results of a strategic review today.
The Mail has learned that the group is forcing suppliers to take a 7.5 per cent cut on their sales to Mothercare at a time when many small firms are themselves struggling to stay afloat.
One supplier, who did not wish to be named for fear of reprisals, said: ‘They have behaved outrageously and put us in an untenable situation.’
In a letter seen by the Daily Mail, Mothercare’s executive director Mike Logue wrote: ‘I am writing to inform you that we have reviewed our supplier payment procedures.
‘Consequently, we have agreed that our trade suppliers should provide more favorable (sic) terms.’
The letter went on to say that it is slapping a 7.5 per cent ‘settlement discount’ on suppliers from May 18 and added that the number of days it takes to pay them would remain unchanged.
Suppliers said Mothercare normally takes 60 days to pay up, compared with 30 a few years ago.
Settlement discounts are common in the retail sector. Originally, suppliers offered them to customers in return for paying promptly.
But the supplier said: ‘Big customers are now exerting their muscle to demand a discount even when they are taking longer to pay than before.
‘Their use of the term settlement discount is a complete misnomer. This is just bashing the supplier. They have been eroding our margins in any way possible for the last few years.’
Another furious supplier said: ‘They are making us act as their bank, and now they want us to pay them for the privilege.’
The troubled babycare chain launched a review of its British business in November after reporting half-year pre-tax losses of £81.4m. It has already said 111 stores will be closed out of 352, currently employing 7,500.
New chief executive Simon Calver will today lay out the details of the review that was instigated by chairman Alan Parker.
A spokesman said: ‘As part of the structural and operational review we have taken a closer look at the business, including our supply chain. The changes in supplier terms are part of new better buying initiatives.’
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