Why Shares In Mothercare plc Slid Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

Shares of Mothercare (LSE: MTC) fell by more than 9% after the US firm Destination Maternity withdrew its bid for the troubled baby retailer. Mothercare shareholders saw the 300p per share proposal as undervaluing the business, which has struggled with falling sales from large underperforming stores — a significant number of which have now been closed.

MothercareThe chief executive of Destination Maternity said: “We believe [our] management expertise and strong maternity apparel offering would have provided an attractive enhancement to the Mothercare UK turnaround plan.”

Mothercare also announced that finance director Matt Smith has left to join Debenhams. Smith, who worked previously at Home Retail Group, had been at Mothercare since March 2013.

That leaves new Mothercare boss Mark Newton-Jones to spur the turnaround. Mothercare’s shares have dropped 40% year-to-date and Mr Newton-Jones admits the UK business “needs modernising”. Growing the international business, meanwhile, which delivered a £45m underlying profit compared to a £22m loss in the UK, is another route to creating shareholder value.

Analysts have speculated whether Mothercare may need a £60-90m cash call due to costs incurred from closing even more high street stores.

For a turnaround story shares in Mothercare — trading on a forward P/E of 20 — look a bit pricey.

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Mark Stones has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.