PRESSURE was last week heaped on mother and baby retailer Mothercare after chief financial officer Matt Smith resigned on the same day that US rival Destination Maternity dropped its takeover bid for the struggling UK business.
Mothercare said Friday that Smith, who has succeeded Simon Herrick as finance director at Debenhams, has a notice period of 12 months and will remain with the business until a successor has been appointed.
Smith’s departure was announced on the same day that Destination Maternity scrapped its £266m bid, citing a lack of support for the deal from Mothercare’s board and shareholders.
Mothercare said today that it is now “fully focused on the company’s plan to turnaround the UK business”. However, analysts have warned that the company needs to make a £90m cash call to pay down its bank debt and cover the costs of UK store closures.
“There is no glossing over Mothercare UK’s current problems and, it seems, even the finance director Matt Smith would rather be working for the troubled Debenhams than the very structurally challenged Mothercare,” Mike Dennis, managing director, food and general retail at Cantor Fitzgerald, told the Guardian.
“Mothercare group requires a £60m-£90m rights issue (rebasing, writing off of share options) to cover the costs of closing more UK high street stores and paying down its £100m of banking facilities before this October,” Dennis added.
The loss of Smith, who was named as CFO in March 2013, is a further blow for the struggling retailer following the departure of chief executive Simon Calver who quit in February, weeks after a profit warning showed attempts to turn the business around had stalled.
New chief executive Mark Newton-Jones, whose appointment was confirmed earlier this month, said that Mothercare’s loss-making UK business is in need of a complete overhaul. In an interim management statement covering the 15 week period to 12 July 2014, Newton-Jones said the business needs modernising and requires investment in its infrastructure, its stores and its head office systems.
“Many of the retail practices need updating, when we compare ourselves to more modern retailers,” he said.
Initially, the turnaround plan will centre on cost reduction and cash generation; rebuilding gross margins; product improvement and improving service levels online and in store.
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