Mothercare

Mothercare (MTC), the retailer for mothers and young children faces considerable challenges as it hunts for a new chief executive.

The fully-listed concern this October announced that it was making what it called a 'leadership change'. Previous chief executive Ben Gordon- who joined the group in 2002 - was described as departing by 'mutual consent' in a year in which it has made a number of profit warnings and seen its share price falter by over 70%.

Earlier in the month the business declared that UK sales had fallen 9.5% on a like-for-like basis, while 'Direct In Home', its internet business had seen revenues decline 6.9%. Despite this sales for the group as a whole grew by 4.9% due to a 17% in international sale. The company reported it was focused on reducing its estate and what it described as its 'cost reduction programme'

Analysts at Seymour Pierce are forecasting  pre-tax profits of £7.9m (2011: £28.5m) on sales of £797.3 (2011: £793.6m) for the year to March 2012. In 2013 profits of £13.5m on revenues of £816.8m are expected. EPS of 6.7p and 11p are forecast for 2012 and 2013, respectively.

Part of Mothercare's problem is that unlike its heady days in the nineties and noughties, today's mothers regardless of socio-economic background are likely to use the internet for purchases, and in the current economic environment many use a variety of websites to compare prices on products such as cots and buggies rather than buying all at once from one retailer.

Key competitors in the baby and young child sector include online concern Kiddicare, global powerhouse Amazon and Middle England's favourite John Lewis. Others operating in the area include online play very.co.uk, Toys R Us (which despite the name now sells products such as children's beds) and Tesco's online offering Tesco Direct. Crucially there are questions over its competitiveness on price and its ability to provide the breadth of products of companies such as Tesco. However unlike many retailers the group does not possess a crippling mountain of debt, most recently declaring net cash of £15.3 million for the year to March 2011.

With challenges from its online competitors rising fast, Mothercare does not possess a clear 'edge' over its rivals, also lacking the premium image or reputation for customer service of a company such as John Lewis that could help it to differentiate itself from companies such as Kiddicare. Having already lost 70 per cent of its value this year following a number of profit warnings we are not confident of the group's prospects. Sell.