Mothercare gripped by crisis

THE brand was simply unbeatable. You only had to ask any mother-to-be or parent of a toddler which shops catered for their needs, and Mothercare would be near the top of the list.

But it was repeatedly beset by problems with the nitty-gritty of retailing. Hiccups with its new warehouse operation meant merchandise wasn't turning up in the shops. Investors were fed a string of excuses by management about what had gone wrong and how it was going to be sorted out.

The year? It was 1987. But 15 years on it all sounds terribly familiar. Mothercare has a name that still commands huge recognition, but it has a brand new set of warehousing problems.

And its management - or what is left of it - is trying to reassure shareholders that things really can get better.

But there is one profound difference between then and now. Despite its warehousing problems, Mothercare made £35 million in 1987. In the 12 months to March this year, it made £4.2 million. And since then it has admitted that it lost £5.4 million in the first three months of the new financial year. Mothercare is in deep, deep trouble.

Its latest problems have cost chief executive Chris Martin his job. Last month, when Mothercare issued a warning about first-quarter losses - the fourth profits warning in less than a year - it was also announced that Martin was leaving with a £470,000 pay-off.

Finance director Mark McMenemy, who is holding the fort, last week cut short a holiday in Majorca after complaints about Mothercare not having anyone in charge while it tried to get to grips with its problems.

Chairman Alan Smith is being replaced later in the year by Ian Peacock, who already chairs MFI.

The company, founded in 1961 by entrepreneur Selim Zilkha and floated in 1972, has been in decline for decades.

In 1982, it merged with Terence Conran's Habitat and became the core of Storehouse, which in turn grew through acquisitions during the Eighties before being gradually dismantled in the Nineties. That process ended with the sale of Bhs to Philip Green two years ago for a knockdown £200 million.

Mothercare, in common with other established clothing retailers, has faced tougher competition from discounters and supermarkets. Market researcher Sofres Taylor Nelson reckons discounters' share of the children's clothing market has grown from 7.8% in 1998 to 13.7% today.

In the same period, supermarkets increased their share of the £3.4 billion children's clothing market from 6.4% to 10.1%.

But none of this can explain or excuse Mothercare's dire performance. Despite the company's chronic problems, some 96% of pregnant women visit the shop at least once. And there are, after all, about 750,000 pregnancies a year.

The problem for these expectant mothers - and Mothercare - is that having got to the shop, too often they find it doesn't have what they want.

Mothercare's stock market value is little more than a third of its level two years ago. Not surprisingly, there have been persistent stories that it could be the target of a bid, probably backed by venture capitalists. Terry Green, who is now leaving Bhs having spent two years there since its split from Mothercare, has been repeatedly touted as a possible figure to spearhead a takeover.

Unless there is a complete transformation of the business, no one expects Mothercare to deliver for a very long time.