Analysts react to Mothercare’s first-quarter results as Mark Newton-Jones takes the helm

“Mark Newton-Jones is already committed to pursuing a more aggressive plan of recovery, which will begin with further rationalisation of the retailer’s loss-making portfolio, with a view to reducing the UK network to fewer than 200 stores.

“Newton-Jones also introduced a fresh, four-point strategy for remedying the group’s fortunes; namely, cost reduction and cash generation, rebuilding gross margins, service improvement in-store and offline and product refinement. These aims give the group’s strategy some lucidity and will help Mothercare to recreate a basic, stable domestic infrastructure. Working towards online eminence in particular will help to increase both convenience and relevance for Mothercare’s time-pressed target market.

“Mothercare, together with nursery toys subsidiary Early Learning Centre, is still perceived as a novelty in a number of overseas destinations and it is this international demand that has helped the retailer to remain a viable business overall, despite its diminished appeal on native heath.

[Rejecting the Destination Maternity bid] means Mothercare will have to work harder than ever to prove its worth. This will be a make-or-break year for the company, with Mark Newton-Jones risking his reputation on the retailer ‘at the most pivotal time in its history’. With compelling competition, Mothercare has a lot to do if it is to have any hope of reigniting enthusiasm for its brand at home.” Anusha Couttigane, Conlumino

“Ahead of today’s Q1 update, the shares succumbed to profit-taking yesterday, as if there might be some bad news today from Mothercare, but on the face of it things look fine. The new cief executive Mark Newton-Jones seems up for the challenge, despite finding that that the business is under-invested.” Nick Bubb, retailing analyst and consultant

“The company has engaged in less discounting activity, suggesting less gross margin pressure. Given the track record of quarterly volatility, and uncertainty in terms of the new chief executive’s plans, we think the risk:reward ratio here is unfavourable. We think a successful bid from Destination Maternity is unlikely to emerge.” Sanjay Vidyarthi and Adam Tomlinson, Liberum

“This morning’s trading statement is something of a curate’s egg. The UK like-for-like performance is modestly improved at +0.9% despite less promotional activity year on year.

“We understand and support management’s desire to remove unprofitable sales from the mix but remain concerned that, last time around, disappointing online sales proved a prelude to difficulties to come in the traditional store estate. Price transparency on the internet is greater and we watch the evolution of these sales with interest.

“Comments from Mark Newton Jones suggest there is significant investment to come into the systems and infrastructure in order to return Mothercare to a modern world-class retailer. We should expect an increased capex bill in due course.” Eithne O’Leary, Jonathan Pritchard and Anjli Shah, Oriel Securities