News Column

Mothercare boss demands major modernisation plan

July 18, 2014

Zoe Wood

Mothercare's loss-making UK chain is old-fashioned and needs a complete overhaul, according to the retailer's new boss.

Mark Newton-Jones, whose appointment was confirmed earlier this month, was frank in his assessment of the mother-and-baby specialist's domestic operation, which in recent years has struggled to compete with the march of the supermarkets into its sector.

"In the UK, my early observation is that the business needs modernising and requires investment in its infrastructure, its stores and head office systems," he said. "As a result, many of the retail practices need updating, when we compare ourselves to more modern retailers."

His assessment makes grim reading for investors, given that Newton-Jones's predecessor Simon Calver, who left after a disastrous Christmas trading performance, had embarked on a turnaround in 2012. The shares fell nearly 9% to 255p on the prospect of more heavy lifting.

The stakes are high for Newton-Jones: earlier this month Mothercare rebuffed a pounds 266m takeover bid from US rival Destination Maternity, arguing that the 300p-a-share offer undervalued the company and its prospects.

The company refused to comment on the likelihood of its US rival, which wants to get its hands on Mothercare's successful overseas business, returning with a higher offer before the 30 July deadline. Instead, Newton-Jones used the trading update to set out the themes of a turnaround that involves weaning customers off promotions and thrashing out better deals with suppliers. He also plans to cut costs, improve customer service and introduce more upmarket product ranges.

It was too early to put a figure on the cost of implementing his vision and whether the company would have to ask shareholders for funding, he said.

Under Newton-Jones, who joined as interim boss in March, the performance of its UK chain has started to improve, with like-for-like up nearly 1% in the 15 weeks to 12 July. Online sales were down more than 6% as it ran fewer promotions, but the company said the sales it did make were more profitable. Sales at its large international business also picked up pace, with like-for-likes up by 14.7%.

Conlumino analyst Mark Piner said it was a "make or break year" for Mothercare.


Bibs at a Mothercare store in London. The UK operation has been struggling

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Source: Guardian (UK)

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