Britain’s retail sector has given us some decent share price performances in recent years - including the likes of Asos, Boohoo, JD Sports, WHSmith and even B&M. But it’s also given us a few slow-burning failures.
For those companies that have adapted and positioned themselves to cash-in on changing consumer trends, the results have been impressive. But for those that were outmaneuvered, out-competed or just too outdated in the face of shifting buying patterns, it’s been a blood bath.
News this week that the baby goods chain Mothercare is putting its UK business into administration is surprising in some ways, but not others. For many years Mothercare was a right of passage for young families. It’s a British brand held in high esteem and a lot of us have some affection for it. But in the age of the internet, that isn’t enough. While Mothercare was well-loved, fewer and fewer new parents ever considered shopping there.
As a result, Mothercare has spent years fighting for its survival. Competition from supermarkets and online retailers has been ferocious in the babycare market. It was hamstrung by its large, out-of-town stores and didn’t offer the easy online shopping and rapid deliveries demanded by its internet-savvy demographic. Hints earlier this year that it might be turning a corner turned out to be a mirage.
In Mothercare’s international business, where it just supplies goods to franchised stores, things haven’t been as bad. Its solid, well-respected brand has done better abroad than at home, and this is now the focus of what’s left. Efforts to reinvigorate the international side of Mothercare are underway. However, as an investment, it’s very much in the kind of distressed territory where you’ll only find hardened value investors.
Another retailer facing crunch decisions this past week has been Carpetright. As a specialist in floorcoverings, Carpetright is different to Mothercare but there are some similarities. As it stands, the firm seems to think its best chance of survival lies in its biggest debt provider taking it private - something that would crystallise the collapse for equity holders.
Like Mothercare, Carpetright has been on the ropes for a while. Lacklustre consumer demand and a predatory, well-financed competitor - Tapi - have made life difficult. For investors, the future for this stock looks threadbare to say the least.
Despite catering to different markets, the slow-burning declines of…
