Thursday’s Q4 trading update
The beleaguered retailer’s 2017 was, in a word, awful. Starting at £1.13, the stock actually appeared to be making progress in the first half of the year, at points climbing above £1.30. The illusion of a turnaround was dismissed by summer, however, with the second half of 2017 becoming rather unpleasant for Mothercare. Eventually it closed out December at 66.75p, a 40% drop in the space of 12 months.
That decline has only sped up since 2018 began, with things so bad that there is every chance the company might not exist by the end of the year. Mothercare PLC sits at a current trading price of 17.95p, already marking a 72% slump in just over 3 months.
The stock got into trouble almost immediately, its January 8th statement sparking a 35% single session slide. There Mothercare had warned that its annual pre-tax profit would come in at £1 million to £5 million, down from analysts estimates of £10 million (which itself would be half of what was posted in 2017), as UK like-for-like sales across the third quarter plunged 7.2%.
The drama didn’t end there. The start of March saw the firm claim its pre-tax profit would be at the lower end of the range stated in January, but with net debt ‘slightly better than the £50 million previously guided’. A few weeks later Mothercare said that talks with lenders were ‘progressing constructively’, while on the 4th April CEO Mark Newton-Jones was replaced with immediate effect by former president of Kmart Holdings David Wood.
In terms of Thursday’s release, analysts are speculating that Mothercare might announce that it is entering a company voluntary arrangement, a form of insolvency that has recently been used by high street peers like New Look and Select.
Mothercare (LON:MTC) has a consensus rating of ‘Hold’ alongside an average target price of 52p.
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