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New Mothercare CFO can expect ‘more relaxed’ balance sheet

MOTHERCARE has sought to reassure a rattled market over its recent performance with the appointment of Richard Smothers as CFO.

Smothers, the former group finance director at can maker Rexham, is set to replace incumbent Matt Smith, who is leaving to become CFO at Debenhams on 20 January. Smothers will formally join the mother and baby specialist on 23 March. He earned his retailing spurs at Tesco where he spent 14 years in a number of roles, including FD (Asia), CFO of Thai operations, Tesco Lotus and FD for UK operations, after holding down various positions at Cargill, the multi-disciplinary behemoth with a hand in industries from alcohol to poultry processing.

“Richard has a wealth of experience, having worked for multibillion-pound global businesses, and his financial and commercial expertise will be extremely valuable as we implement our strategy to transform and modernise our business,” says Mothercare CEO Mark Newton-Jones.

Smothers joins the retailer – which also own the Early Learning Centre brand – during the execution of a turnaround plan, which has involved a £100m rights issue in order to fund store closures and refurbishments as it attempts to return its UK business to profitability.

As part of that plan, Mothercare has already closed 14 loss-making UK stores and reduced the volume of discounts and special offers.

It is also committed to ridding itself of what some commentators felt was an old-fashioned appearance and giving its shops a modern makeover, replete with tablets and interactive screens.

The retailer has struggled for some time to compete with the more competitively priced supermarkets and issued a profit warning in January last year before becoming the target of a £266m takeover attempt by US rival Destination Maternity. The bid was dropped in July on the same day that Smith resigned as CFO, with Destination Maternity citing a lack of support for the deal from Mothercare’s board and shareholders.

Mothercare rejected the bid on the basis that – despite its struggles, a series of profit warnings and the recent loss of its CEO, Simon Calder – it was undervalued and “did not reflect the inherent value” of the brand.

Online sales surge
On a positive note, it has seen a surge in its online sales, which account for 25% of all UK income.

N+1 Singer retail analyst Matthew McEachran explains that Mothercare is now in a “better position than they were 12 months ago” and that, as the CFO has received the backing of the shareholders with the £100m rights issue, he “will already have a much more relaxed balance sheet, so it’s virtually job done on that front”.

McEachran adds that as its competitors, Mamas & Papas and Kiddicare, were both reducing store numbers, and supermarkets trimming their ranges, like-for-like sales and profitability would benefit.

While the firm operates over 1,000 stores in more than 60 countries, over a third of its revenue is still derived from UK sales. Its Asian offering is its star performer and fastest-growing region, with 372 stores in 12 countries. The Middle East is also performing strongly.

In its results for the half-year to 11 October 2014, Mothercare revealed that its losses from its UK stores had fallen to £13.5m, compared with £14.9m from the previous year. Overall group pre-tax profits were £5.5m in the same period, compared with an £11m loss in 2013. International profit remained static at £25.3m.

The wider sector is facing stormy times with web-only mother and baby site, Kiddicare recently sold to investors Endless from supermarket giant Morrisons for just £2m.

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