Mothercare Share News (MTC)

** The collapse of two high-profile British retailers andsigns of stress at Carpetright made for a grim week fora sector battling with online competition and weak consumerspending

** Toys R Us UK and Maplin both entered administration onWednesday, while Carpetright warned on profits for the thirdtime in four months on Thursday

** Analysts are looking at two key metrics to test whichretailers are under stress

** The first is the fixed charge cover ratio: a metric thatcompares a company's fixed costs like rent and debt repayment toits earnings. When this measure approaches a 1:1 ratio, it cansignal a company is struggling to pay these costs

** Brokers Canaccord Genuity and Cantor Fitzgerald both seeCarpetright’s cover ratio nearing 1:1 in 2018, while departmentstore chain Debenhams is close to the figure

** Ratio is sometimes used in banking covenants, accordingto Cantor

** Carpetright is in talks with lenders to strengthen itsbalance sheet; Mothercare said on Friday it will requirewaivers of some debt covenants

** The second metric is operating leverage, that tracks howsensitive a company’s profits are to changes in its revenue. Ahigh level of operating leverage can indicate that a dip inrevenue, like the kind caused by cold weather, can wipe outsignificant amounts of profit

** All three stocks have some of the highest levels ofoperating leverage in the UK retail sector, according to Cantorand Canaccord

** The companies have seen significant levels of shortinterest – bets against a company – in recent years.Carpetright and Mothercare are both down nearly 90percent in the last three years, while Debenhams has fallen 70percent