By Mark Kleinman, City Editor
Mothercare is considering the sale of its loss-making Early Learning Centre (ELC) chain as it bids to meet a target of restoring its UK operations to profitability by 2015.
Sky News has learnt that Mothercare has been holding talks with potential advisers about a sale in recent weeks, although the company has not yet made a formal decision to offload the specialist retailer of educational toys for young children.
Analysts believe that disposing of the business, which has perennially underperformed during the six years that it has been owned by Mothercare, may be difficult because of its poor track record.
It may, however, appeal to firms which are accustomed to investing in struggling high street chains, such as Hilco, which snapped up HMV for a token price earlier this year.
In a trading update published on Thursday, Mothercare said that it had continued to close stores in the UK amid difficult trading conditions.
"The UK market has been very competitive during the last quarter and we have continued to focus on delivering cash margin," it said.
"In line with our plan, we closed a further 13 loss-making stores (four Mothercare and nine Early Learning Centre) during the first quarter of the year.
"We now have 242 stores (192 Mothercare and 50 Early Learning Centre) in the UK. Space is down 7.7% year-on-year and is reflected in the 7.9% decline in total UK sales for the first quarter."
The talks with banks about a sale of ELC could result in an appointment imminently, with Lazard understood to be in the frame for the role.
Mothercare paid £85m for ELC but is unlikely to recoup anything like that sum if it manages to sell the chain.
The group wants to cash in on the imminent birth of the royal baby with the launch of a range of themed products, Simon Calver, the former Lovefilm executive who now runs Mothercare, said on Thursday.
Mothercare, which has a market value of around £400m, now has a much larger business outside the UK than in its home market. It's share price has rebounded strongly since Mr Calver's arrival.
A Mothercare spokeswoman declined to comment.
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