Hargreaves Lansdown says Mothercare still faces challenges

10th Apr 2014 12:37

Broker Hargreaves Lansdown has called Mothercare a no-go stock for investors despite a bounce-back in UK and international sales.Hargreaves said the City was advising investors to sell Mothercare due to tough competition, currency headwinds and the lack of a chief executive.Mothercare on Thursday reported a 0.6% rise in total group sales in the 12 weeks to March 29th, although they fell 2.6% in the year to the same date.It said its international division had improved constant currency sales by 9.8% in the quarter but an increasing level of currency devaluation had reduced reported retail sales by 1.8%.Hargreaves Lansdown analyst Keith Bowman said the better figures had prompted "a large sigh of relief" from investors.But he noted Mothercare's comments that it expected currency headwinds to again affect the group in the next financial year and that the company's markets, such as toys, remained highly competitive. Group net debt increased as of its half-year results to £48.0m, versus £29.8m. Bowman also pointed out that Mothercare had yet to appoint a new Chief Executive to replace Simon Calver.Bowman said: "In all, and with the share price having fallen by over 40% in the last three months alone, some correction to what appears to have been a prior overreaction looks to be taking place."Nonetheless, Mothercare remains in a tough place. Competitors such as Next continue to court the group's traditional customers, while the track record of UK retailers overseas remains somewhat patchy. For now, analyst opinion denotes a sell."PW