Struggling Mothercare (MTC) sheds 0.5p to 247p after announcing that chief executive officer (CEO) Simon Calver has resigned 'with immediate effect'. The unexpected news creates further uncertainty towards the structurally-challenged mother and baby products retailer, still reeling from a profits alert last month.


Web chart - Mothercare - Feb 14

Former Lovefilm boss Calver leaves the embattled Mothercare and Early Learning Centre brand owner at the end of March after less than two years in the hot seat. He will receive a £250,000 payment in lieu of six months' notice. Chairman Alan Parker is now on the lookout for a new CEO, with analysts speculating a more experienced retailer with proven pedigree in managing margins and costs will need to be hired.


No reason is given for Calver's departure, though he may have tired of the task of turning round a retailer battling against competition from cheap online rivals and large supermarket operators. Mothercare has made progress in accelerating multi-channel development under Calver's stewardship and even reported its first half-year underlying profit since 2010/11 back in November 2013, yet margin pressures persist and the UK business remains loss-making despite numerous store closures and refits.


Parker reassures that full-year results to March will meet forecasts downgraded following last month's (8 Jan) profits warning, blamed on fierce UK discounting and weak economic conditions overseas. The chairman is also at pains to expresses confidence in the underlying strength of the business, though Shares still sees risks to forecasts facing the £226 million cap.


Our view is shared by Oriel Securities, sticking with its 'reduce' rating on Mothercare and with a 220p price target. The broker writes: 'The surprise departure of CEO Simon Calver will unsettle Mothercare shareholders as the business battles to cope with an increasingly price driven and competitive market. Whilst the absence of a CEO may ignite bid speculation in the short run, the road to recovery is likely to be long.'

Issue Date: 24 Feb 2014