Business

Mothercare shares fall 9% as boss warns it must modernise

General view of the Mothercare sign
Image caption Mothercare has said it does not expect to return to profit until 2017

Shares in mother and baby retailer Mothercare have fallen nearly 9% after its new boss said the business needs to modernise if it is to make a profit in the future.

Chief executive Mark Newton-Jones said the company had to embark on a cost-cutting programme, needed to generate cash and improve its products.

Mothercare has previously said it hopes to return to profit in 2017.

In January, it issued a profit warning following weak Christmas sales.

In a trading update before Thursday's annual general meeting, Mothercare said like-for-like sales at UK stores - which strip out sales at stores open less than a year - had risen 0.9% in the three months to 12 July.

But total sales - which do include sales at newly opened stores - fell 1.2%.

Investment

Internationally, Mothercare said its 1,221 stores in 59 countries reported sales up 14.7%.

Mr Newton-Jones said the retailer "requires investment in its infrastructure, its stores and its head office systems".

He added that "many of the retail practices need updating when we compare ourselves to more modern retailers".

But the former Next executive said the international business was a "robust business model with further growth opportunity".

Mr Newton-Jones has been interim chief executive at the retailer since March, following the departure of Simon Calver, who resigned in February.

Image copyright PA
Image caption Mothercare boss Mark Newton-Jones has said the retailer must modernise if it is to return to profit

He was unveiled as the retailer's permanent chief executive last week and formally takes over the role today.

Mr Newton-Jones did not say how Mothercare intends to raise the extra cash that he believes the company needs.

Takeover bid

But Cantor Fitzgerald analyst Mike Dennis suggested Mothercare might have to launch a deeply discounted rights issue or set up a joint venture in order to inject cash into the business.

Earlier this month, Mothercare revealed it had rejected a takeover approach from US rival Destination Maternity, which valued the company at £266m, or 300p per share.

Shares in Mothercare were 8.77%, or 22.50p, lower to 257p by mid-morning on the London Stock Exchange.

Under UK takeover rules, Destination Maternity, which has 1,900 stores, must make a revised offer for Mothercare by the close of business on 30 July or walk away for six months.

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