Can Mothercare bounce back?

Thursday, 22nd November 2018 09:29 - by Rajan Dhall

It is no secret that Mothercare and the high st, in general, have struggled in recent times. The question I want to ask is if its possible to bounce back. This morning the children's clothes and toy specialist sent out its half year report. Here are some of the highlights:

·      Group adjusted loss before taxation of £6.2 million (H1 FY17/18: loss of £2.6 million)

·      Reduction in statutory Group loss before taxation to £14.4 million (H1 FY17/18: loss of £16.8 million)

·      Net debt of £21.5 million (£44.1 million at 24 March 2018)

·      On track with strategic transformation plan to deliver at least £19 million of cost savings

·      UK store closure programme ahead of schedule

·      Continuation of difficult trading conditions in the UK

Mark Newton the CEO has made it clear that the business is really focused on the transformation of the business. He also goes on to say that the company remains confident about this strategy.

Looking at the chart now I think it's obvious to see that the market is still focused on this downtrend. The lows of 10.82p in my view will only be hit if conditions in the UK and its high st worsen. Interestingly, the volume does not seem to have subsided on the buy side. Could the market potentially see value at these low levels? 

Moving on, I think its more than just technicals to look out for here. The rents in the buildings are high, recently Mike Ashley recently closed 4 House of Fraser stores after the landlords refused to lower rents. Also, we will need to see how the government's online shopping tax will help the high st and maybe we could see a reduction in business rates. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.