LONDON: The new boss of British mother and baby products retailer Mothercare, the subject of bid interest from US group Destination Maternity, said the company operates in an outdated way in its key home market and requires investment.
Mothercare operates in 60 countries but has been hit hard by cut-price competition from supermarket groups and online retailers in its domestic market, where it does not expect to make a profit until 2016 or 2017.
“The business needs modernising and requires investment in its infrastructure, its stores and its head office systems,” said Mark Newton-Jones, who became the firm’s permanent chief executive this month after four months as CEO.
“As a result, many of the retail practices are somewhat outdated when we compare ourselves to more modern retailers,” he added.
He said he would detail his plans for the business in the autumn after he has completed a strategic review. Newton-Jones has already changed Mothercare’s trading strategy in the UK, moving away from aggressive discounting and concentrating on full-price sales to rebuild gross margins.
He has also talked to suppliers about improving terms, is consulting with 15 percent of the 4,500-strong UK workforce to adjust their hours and plans improvements to in-store and online service, as well as product improvement, with less emphasis on value ranges.
The CEO said Mothercare’s lead time for bringing in new products is half what it should be about 20 weeks, against 10-12 weeks at fast moving retail businesses. Mothercare has rejected two proposals from its US suitor, saying they undervalued the company and its prospects.
Newton-Jones declined to say if he expected the US company to come back with a higher offer before a July 30 deadline. “Given the track record of quarterly volatility, and uncertainty in terms of the new chief executive’s plans, we think that the risk-reward ratio here is unfavourable,” said the analysts.
Mothercare sales at British stores open for more than a year rose 0.9 percent in the 15 weeks to July 12, its financial first quarter, compared with the same period last year.
Sales in its overseas division were up 14.7 percent in the period on a constant-currency basis but increased 0.8 percent on a reported basis, reflecting currency devaluation in Russia, Turkey, India and Indonesia.
<Center><b><i>Copyright Reuters, 2014</b></i><br></center>
Comments
Comments are closed.