The shake-up aimed at restoring the fortunes of the chain – details of which were first reported by Sky News – is expected to result in 800 job losses.
It will also see the return of chief executive Mark Newton-Jones just 36 days after he unexpectedly left the company.
David Wood, the man brought in to replace him, becomes managing director.
Mothercare, which has been trading since 1961, said it was facing a “perilous financial condition” and had identified a large number of loss-making stores.
The plans came as the company reported a £72.8m pre-tax loss for the year to 24 March, compared to a £7.1m profit a year before – dragged into the red by costs such as restructuring, store closures and writedowns in the value of parts of the business.
It acknowledged in the annual results that its future as a “going concern” hinged on its ability to gain approval for the closure plan from creditors – a decision which represented a “material uncertainty” about its future.
Mothercare’s restructuring would see it shrink from 137 stores to 78 in two years’ time and 73 in 2022 – down from a UK network of more than 400 stores in 2007 shortly after it bought the Early Learning Centre chain.
The company’s 2017 annual report showed that it employed more than 5,000 people, most of them in Britain. It has more than 1,000 stores overseas, many of them operated as franchises.
Clive Whiley, Mothercare’s interim executive chairman, said: “The recent financial performance of the business, impacted in particular by a large number of legacy loss-making stores within the UK estate, has resulted in an unsustainable situation for the Mothercare brand, meaning the group was in clear need of an appropriate resolution.”
Shares leapt by as much as 31% after the announcement.
Mothercare also plans to raise £28m from shareholders through a share placing while it has also extended £67.5m in debt facilities with lenders as well as arranging £18m in credit with investors and trade partners.
The company plans cuts to its UK shop network under a company voluntary arrangement (CVA), a solution which must be approved by creditors and would also see rent reductions at 21 further outlets.
It will follow New Look, Carpetright, House of Fraser, Prezzo, Byron and Toys R Us UK, all of which have announced CVAs in recent months in an effort to shed loss-making sites.
Retailers have been under severe pressure in recent months amid a year-long period in which household finances have been squeezed by the combination of rising inflation and stuttering wage growth.