Mothercare Companys Financial Performance, Industry, and Competitors - Statistics Project Example

INTELLIGENCE REPORT: MOTHERCARE Key financial information By the year ended March 2014, Mothercare Company had a total of 220 stores and it was forced to shut down 35 stores that were making losses. Total direct sales of Mothercare Company in March14 grew by 5.0% at £134.1 million. Direct in Home sales expanded by 5.9% at £993 million while Direct in Store up sales enlarged at 2.7%, which amounts to £34.8 million. The investment in regard to online mode, enhanced delivery options and customer’s encounter has contributed to the raising sales. The next day click-and-collect online service that provides delivery options accounts for a third of the entire online orders. On the other hand, total wholesale sales in the UK in March14 market dropped by 5.7% representing £29.7 million. Nevertheless a strategic partnership with Boots, Miniclub, increased sales and performs well in UK market (Mothercare plc 2014, p. 3). Mothercare Company’s online sales accounts for 25% of the total UK income. Retail analyst for N+1 Singer, Matthew McEachran, explains that Mothercare is currently in ‘better position than it was one year ago’. A report by Warmoll (2015), reveals that Mothercare losses coming from its UK stores had dropped to £13.5m in comparison to £14.9m in the previous year. From the perspective of overall group pre-tax profits, mothercare stands at £5.5m in the same time, in contrast to £11m loss in 2013. However, the international profit was constant at £25.3m (Warmoll 2015, para 13). Mothercare Company shares went down by 6.02pc or 11.25, to 175.5p as a result of a statement released by the organisation that it was negotiating with its banks about funding and future strategies for the business (Armstrong 2014, para 3). A report by Armstrong (2014, para 4), discloses that Motherecare’s net debt stood at £48m in November, which had an impact on the cash inflows in the second-half. Analysts at Cantor Fitzgerald reveal that the company has discussed its bank conditions three times in a period of two years. This is an indication that Mothercare Company recovery strategy needs much more capital than £90m that is not available in the present total banking facilities. As a result the company uses a tactic of extending credit terms to suppliers as a way of recovering money (Armstrong 2014, para 5). Fig. 1 A visual representation of the company’s financial performance for the past five years. A five-year record (unaudited) (Mothercare plc 2014, p. 139) 2014 £ million 2013 estimated £ million 2012 £ million 2011 £ million 2010 £ million Summary of consolidated statements Revenue 724.9 749.4 812.7 793.6 766.4 Underlying1 profit from operations before interest Non-underlying2 items Interest (net) 15.9 (35.0) (7.2) 11.8 (29.4) (6.3) 2.0 (104.4) (0.5) 28.9 (19.5) (0.6) 37.6 (4.4) (0.7) (Loss)/profit before taxation Taxation (26.3) (1.2) (23.9) 0.1 (102.9) 11.1 8.8 (2.3) 32.5 (8.9) (Loss)/profit for the financial year (27.5) (23.8) (9.18) 6.5 23,6 Basic(loss)/earnings per share Basic underlying earnings per share (31.0p) 7.7p (26.9p) 4.2p (105.2p) 1.8p 7.6p 24.7p 28.0p 31.5p Summary of consolidated balance sheets Deferred tax asset Other non-current assets Net current assets Retirement benefits obligation Other non-current liabilities 18.5 111.5 12.2 (49.7) (77.3) 21.7 124.1 45.6 (61.6) (91.0) 17.6 145.2 24.0 (52.7) (61.4) 6.9 208.6 54.4 (37.6) (39.5) 7.9 200.5 70.6 (55.1) (35.5) Total net assets 15.2 38.8 72.7 192.8 188.4 Other key statistics Share price at year end 189.0p 315.0p 166.0p 474.0p 601.0p Net (debt) cash to equity (238.5%) (83.5%) (27.6%) 7.9% 20.4% Capital expenditure 10.9 16.2 24.9 21.8 24.2 Depreciation and amortisation 20.3 21.4 22.8 23.0 20.5 Rents 48.7 54.2 65.4 68.2 69.1 Number of UK stores 220 255 311 373 387 Number of international stores1 1,221 1,069 1,028 894 728 UK selling space (000’ssq.ft) 1,737 1,805 1,946 2,017 2,008 International selling space (000’s sq.ft)1 2,656 2,347 2,283 1,845 1,538 Average number of employees 5,613 6,226 6,943 7,440 7,452 Average number of full time equivalents 3,486 3,959 4,350 4,650 4,486 Overview of the company’s industry and competitors Mothercare Company is a business enterprise that specialises in products for babies and children up to eight years, as well as expectant mothers. Mothercare gives a wide range of products that include maternity clothing, pushchairs, clothing for children and pushchairs. In addition, the company through its retail activities in the UK provides home furnishings, travel equipment, toys, feeding and bathing products. Mothercare Company has various international branches that run through franchises in Far East, Middle East, Europe and Africa using ‘Mothercare’ brand name. Moreover, Mothercare Company acquired Chelsea Stores Holding Limited in June 2007 that owns Early Learning Centre brand. Under Early Learning Centre, the company provide books and toys containing educational information (Mothercare plc. 2015, para 1-4). Mothercare Company faces stiff competition from Mama & Papa business that offers wide range of baby products, furniture and interiors, toys and gifts, kids and baby clothing as well as pushchairs (Shop Direct Limited n.d, p. 1). Another competitor Toys R US company provides the same products as Mothercare but have an advantage of other different products such as outdoor fun products, multimedia and bikes (Toys R US 2015, para 2). Boots and Mothercare has a joint venture that creates a stylish collection of high standard clothing for children between the ages of 0-6 years at an affordable cost. This has helped to increase Mothercare marketing and sales (Miniclub 2014, para 1). Analysis of the industry and the position of Mothercare According to a research by Scaramanga (2015), there was a growth in the search volume for baby products in 2014 compared to 2013. The increasing development of the sector is realised from expanding financial safety since the recession, which has resulted in purchase choices trust. The industry has been an attractive field for upcoming businesses where large expansion was witnesses in 2014. It is estimated that there will be more than 6,000 organisations dealing with baby products selling through e-tail by 2018 (Scaramanga 2015, para 3). On the basis of brand searches per month, Mothercare Company ranks position six with 27100 searches. The leading company is Toys r US with 1500000 searches and the last company is i candy world with 50 searches (Insideonline 2015, p.4). Mothercare social media presence compared to its competitors A report by Rigby (2010), indicates that Mothercare Group consisting of Early Learning Centre and Mothercare brands launched a social media strategy (para 2). The company selected Diffusion an integrated agency to create a plan that targets 4.6m UK mothers who take more than 26hours exploring the internet every month. The strategy includes a plan to actively listen to how consumers perceive its products and brand online. In addition, the aim of the strategy is to enlarge participation of social network sites, parenting blogs and forums, which puts the company on the competitive edge against its competitors (Rigby 2010, para 3). Bibliography Armstrong, A. (2014, May 6). Markets Report: Mothercare investors throw a tantrum. Retrieved May 29, 2015, from http://www.telegraph.co.uk/finance/markets/10811950/Markets-Report-Mothercare-investors-throw-a-tantrum.html INSIDEONLINE. (2015, May 1). BABY PRODUCTS Sector Report. Retrieved May 29, 2015, from http://insideonline.co.uk/wp-content/uploads/2015/05/BabyProducts-SectorReportDigital-2.pdf MINICLUB. (2014). Mothercare Careers. Retrieved May 29, 2015, from https://mothercare.team.careers/mini-club MOTHERCARE PLC. (2015). Mothercare plc - Company History... Retrieved May 29, 2015, from http://www.mothercareplc.com/company-history MOTHERCARE PLC. (2014). Mothercare plc Annual report and accounts 2014 Mothercare plc Annual report and accounts 2014. Retrieved May 29, 2015, from http://www.mothercareplc.com/download/Overview-2014.pdf MOTHERCARE PLC. (2014). Financial Statements. Retrieved May 29, 2015, from http://www.mothercareplc.com/download/Financial-statements-2014.pdf RIGBY, CHLOE (July 23, 2010). Mothercare plans social media strategy. http://internetretailing.net.Retrieved May 30, 2015, from http://internetretailing.net/2010/07/mothercare-plans-social-media-strategy/ SHOP DIRECT LIMITED. (n.d.). Mamas & Papas | Mamas & Papas Store Online | Very.co.uk. Retrieved May 29, 2015, from http://www.very.co.uk/mamas-papas/e/b/5685.end SCARAMANGA, H. (2015, May 15). The Baby Boom - An SEO analysis of The Baby Products Industry | Inside Online. Retrieved May 29, 2015, from http://insideonline.co.uk/baby-boom-seo-analysis-baby-products-industry/ TOYS R US. (2015). About Us. Retrieved May 29, 2015, from http://www.toysrus.co.uk/toys/content/help/about_us WARMOLL, C. (2015, January 19). New Mothercare CFO can expect 'more relaxed' balance sheet. Retrieved May 29, 2015, from http://www.financialdirector.co.uk/financial-director/analysis/2388923/new-mothercare-cfo-can-expect-a-more-relaxed-balance-sheet Read More