Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1081624

Mothercare slump adds to UK retail woes

Profit warning from baby goods retailer adds to fears over plight of UK consumer following Debenhams slump last week.

 
Mothercare slump adds to UK retail woes
 

Heavy share price falls for chip maker Micro Focus, baby goods retailer Mothercare and house goods provider McBride have dented the UK market is an otherwise listless morning's trading.

The FTSE 100 rose three points to 7,727, with few big movers apart from Micro Focus (MCRO), which tumbled 14.8% to £21.97 after a disappointing update from the chip maker, which bought Hewlett Packard Enterprise's software assets last year.

Micro Focus said revenue would fall by as much as 4% in the year to October, sparking a sell-off in its shares.

Mike van Dulken, head of research at Accendo Markets, said news the company's chief finance officer would move to a more acquisitions-focused role was fuelling fears of more costly purchases.

'Perhaps investors need more time to see that the latest monster acquisition is providing value before hearing more about incremental additions of the older product types the company likes to eke the most out of,' he said.

Numis analyst David Toms, who holds an 'add' rating on the shares, was sanguine about the update. 

'Overall the operating underperformance is modestly disappointing but more than offset by tax, and the building blocks are clearly in place for delivery of the long-term strategy,' he said.

The news will be a blow to Citywire AAA-rated Richard Watts, one of the biggest investors in the company, who holds the stock as a top 10 holding in his top-performing Old Mutual UK Mid Cap fund.

Among 'small-cap' stocks, shares in Mothercare (MTC) lost a quarter of their value, slumping 25% to 46.4p after warning full-year profits would be much lower than expected and cautioning it saw no improvement in the UK market in the short term.

Russ Mould, investment director at AJ Bell, said the retailer was suffering from the impact of supermarkets and online rivals muscling onto its turf.

'The UK environment in particular remains tough and as like-for-like sales weakened in its third quarter the company began to discount heavily at the end of the festive season to shift unsold stock,' he said.

'As a result, adjusted pre-tax profit is now expected by chief executive Mark Newton-Jones to come in between £1 million and £5 million, was below the analysts consensus of £12 million.'

Fund managers hit by the fall include Tom Dobell, manager of the M&G Recovery fund, and Ben Whitmore, who runs the Jupiter UK Special Situations fund, according to Thomson Reuters data.

Fellow 'small-cap' stock McBride (MCB) was also a heavy faller, down 14.2% at 191p after a trading update showing declining revenues.

Citywire AA-rated Philip Rodrigs is a big backer of the stock, with Thomson Reuters data showing his River and Mercantile UK Equity Smaller Companies fund as among the largest investors.

1 comment so far. Why not have your say?

deeply realistic

Jan 08, 2018 at 18:15

I sold several years ago at 300 p the day before they crashed to 200p. Sheer luck

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • Old Mutual UK Mid Cap A Acc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • M&G Recovery
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Jupiter UK Special Situations
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • River and Mercantile UK Equity Smaller Cos A Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the shares

  • Micro Focus International PLC (MCRO.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • McBride PLC (MCB.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Mothercare PLC (MTC.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Philip Rodrigs
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Ben Whitmore
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Tom Dobell
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Richard Watts
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet