Mothercare will be a big challenge for new CEO

The toys are out of the pram at Mothercare.
Or rather, the chief executive is out at the baby and children's specialist retailer.
Mark Newton-Jones, who came to the business four years ago from online retailer Shop Direct with an impeccable record, has gone with immediate effect.His departure comes a month after the latest in a long line of profits warnings from Mothercare. He'll be replaced by David Wood, a former Tesco executive, who has most recently been working as president at the US department store giant Kmart.The change at the top comes at a critical time for Mothercare which, two weeks ago, revealed it had called in KPMG to advise on a financial restructuring while talks continue with its lenders about raising additional funding.Those lenders, including HSBC and Barclays, recently agreed to hold off testing the firm's covenants - the conditions attached by banks when they lend large sums - amid signs Mothercare had hit its borrowing limits.It may well be that those lenders insisted on a change of personnel as a condition of their ongoing support.
Mothercare will be a big challenge for new CEO

Mothercare has been in the doldrums for more than two decades
Mr Wood, who is credited with having led Kmart to a return to profits and who was regarded as a successful UK marketing director during his time at Tesco, would appear to have the right credentials.But the challenge he faces cannot be overstated.Mothercare has been in the doldrums for more than two decades and it has defeated a number of chief executives.Its woes can be traced back to the days when it was part of Storehouse, a retail conglomerate put together by the designer and restauranteur Sir Terence Conran, who built on his existing Habitat business - now owned by Sainsbury's - to take on a number of other businesses.These included BHS and Mothercare, which had first listed on the stock market in 1972, which Storehouse acquired in 1986.
Mothercare will be a big challenge for new CEO

David Wood. Pic: Mothercare
By the late 1990s, Storehouse was not doing especially well, which led to its sale of BHS to Sir Philip Green in late 1999.The rump Storehouse business was renamed Mothercare plc but the core baby and childrenswear operation found itself dogged by legacy problems, such as having to move out of a distribution centre it had previously shared with BHS. A string of profits warnings followed and chief executive Chris Martin, who was later to emerge as chairman of the BHS pension trustees, was succeeded in early 2002 by Ben Gordon.For a while, it was "Nappy Days" as Mothercare briefly became a City darling.Mr Gordon had joined from Walt Disney Co, where he had achieved great success rolling out the Disney Store format around the world, an expansion for which he argued Mothercare was ripe.Pointing out that, while there were 750,000 babies born in the UK every year there were 130 million born in the rest of the world, Mr Gordon set about positioning Mothercare as the world's leading mother and babycare retail brand.
Mothercare will be a big challenge for new CEO

Previous boss Simon Calver joined from the online DVD rental firm LoveFilm
From almost a standing start, he took the business into almost 1,000 stores in more than 50 countries worldwide, including India, China and Russia.It led to a sharp improvement in Mothercare's financial fortunes.From pre-tax losses of €24.8m in 2002/03, Mothercare moved to a position where, by 2007/08, it was making a pre-tax profit of €38.6m.However, while Mothercare's fortunes bloomed overseas, it was still struggling in its domestic market.Mr Gordon's solution, in April 2007, was to pay €85m for the Early Learning Centre - an ill-starred acquisition that saddled it with too many stores just as nuclear winter was descending on the UK high street with the onset of the global financial crisis.Mr Gordon left in 2011 and was replaced by Simon Calver who, joining from the online DVD rental firm LoveFilm, was seen as the ideal person to lead Mothercare's online expansion.Mr Calver's solution was to accelerate the closure of unprofitable stores and then to embark on a modernisation programme that saw stores repainted in pastel colours and styled with yoga studios for prenatal classes.He left in February 2014 following a profits warning, after which, Mothercare found itself on the receiving end of an unwanted €266m takeover approach from US retailer Destination Maternity.This was repelled before the arrival of Mr Newton-Jones that March.His prescription, like that of Mr Calver, was to continue closing poorly performing stores and refurbish those that remained open.
Mothercare will be a big challenge for new CEO

Mark Newton-Jones came to the business four years ago
City centre stores were closed in favour of larger stores in out-of-town locations. A €100m rights issue in late 2014 helped bring down debt.By now, though, Mothercare was facing an onslaught not only from online retailers such as Amazon but also from cheap supermarket competition.Worse still, the oil price crash at the end of 2014 led to a drop in consumer spending in the Middle East, where some of Mothercare's most profitable overseas stores were based.Mr Newton-Jones kept plugging away and, for a while, it looked as if he had achieved a turnaround. In 2016/17, Mothercare enjoyed its first rise in underlying profits for six years.
More from Business

Gender pay gap figures pose more questions than answers

Eight out of 10 big firms pay men more than women

Facebook: Cambridge Analytica data leak hits 87 million users

250 fridges labelled 'don't buy' over fire hazard fears

Vauxhall owner hands boost to Luton plant

Beijing strikes back in trade war with US as Trump accuses China of 'theft'

However, profits warnings in November last year and January this year highlighted that the company still had deep-seated problems, with even sales growth in its online division going into reverse following a refusal to cut prices.Mr Wood's task, then, is a tough one. His first major job will be to return the 55-year old retailer's finances to an even keel.
See also:
Leave a comment
  • Latest
  • Read
  • Commented
Calendar Content
«    Январь 2019    »