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On the shop floor with......Mothercare chief executive Ben Gordon
Take a peek in the latest Early Learning Centre catalogue and you will find Happyland, which contains a Happy High Street where a variety of outlets including Mr Bun & Son the Bakers, the Toy Shop and the Tea Rooms as well as the Post Office appear to be trading happily.
By Glynn Davis
For virtually all retailers this idyllic fantasyland is a world away from the typical high street in Realityland. One exception is ELC parent company Mothercare whose strong trading in the teeth of the downturn could easily justify a place on Happy High Street.Ben Gordon, chief executive of Mothercare, says: “We're not immune from recession but there is resilience in the
He says demand for the company's products in these tough times is being fuelled not just by parental devotion to their kids but also by the improvements that have been made at the company over the past four or five years. “The products are better, the stores have been renovate
d, and the customer experience is much better,” explains Gordon.If share prices are an efficient indicator of success (serious question) then Mothercare really is the king of the playpen. They currently stand at the same price they were 12 months ago - around the 400p level - which is some achievement when you consider that the retail sector is down almost 40 per cent.
If you have lost heart in the stock market (serious question) as a way of keeping score then the trading figures at Mothercare bear out the strong performance the company has enjoyed. In the third quarter to January 9 it increased group sales by 4.2 per cent and like-for-likes increased by 1.1 per cent.
Helping boost the numbers are its key growth stories - direct sales and international - with the former, which accounts for 20 per cent of group turnover, rattling in a 15.6 per cent sales increase, while the latter's turnover jumped by almost 50 per cent.
Gordon suggests both areas are absolutely vital to growth for retailers in today's market: “These are the two big trends in retail and you need to be fully immersed in them. You need both the internet and international.”
Despite the growth international is delivering, Gordon reckons it has been “underestimated by people” and that when they begin to understand it better then they will realise the big opportunity that is there for Mothercare's taking. He likes to cite the fact that only 0.5 per cent of babies are born in the UK, which leaves a massive 95.5 per cent outside the domestic market.
He certainly hasn't underestimated the opportunity and is going hell-for-leather with opening stores overseas. There are now 603 outlets located in 53 countries and the ongoing plan is to add an impressive 100 new units each year around the globe.
Making this growth possible is the recognition and acceptance of the Mothercare name as an internationally recognised brand by consumers from Istanbul to the Middle East to Russia.
“Retail is globalising and customers are expecting global brands. We're groundbreaking on international and are ahead of everyone else. We're probably the most international brand out there. It's an amazing brand,” he suggests.
The company's greatest friend in this aggressive push for stores is franchising. “The franchise network works really well as it allows you to grow very rapidly. We opened 100 stores in the first three quarters
He adds: “The infrastructure you would need - such as property, legal and HR - would make that sort of growth difficult
What also appeals is that it requires little capital, and is therefore less financially risky, and that it enables the brand owner to tap into the franchise partner's knowledge of the local market.
Speaking of the local market in the UK Gordon says it will be interesting to see what opportunities arise from the shake-out in the retail sector which has already seen the closure of Woolworths and the entry of Adams into administration.
The former is believed to have unlocked around 15 per cent of market capacity in toys and some childrenswear share. “It is sad to see companies go down and jobs lost but there is some potential upside for those retailers that remain,” he suggests.
Evidence of how tough it is at home is the 1.8 per cent sales decrease in the third quarter, which compares with the 4.2 per cent increase across the total group. There has also been a currency hit as the dollar's strength has made importing more expensive and negatively affected UK margins. However, Gordon says the dollar is good for the group's international business so the company is to some extent hedged.
The drop in UK sales can be partially attributed to the planned reduction in space that was part of the company's right-sizing programme following the ELC acquisition. This involved the insertion of 81 ELC shop-in-shops into larger out-of-town Mothercare outlets, the closure of some ELC stores and the re-location of some outlets.
Since the deal 50 more ELC stores have been opened overseas to bring the estate up to 150 units and further outlets are being added using franchising with the same partners that are used for the Mothercare stores. The ongoing task for Gordon is to further leverage both brands around the world, which he says will keep him busy.
It will also keep him at the business because despite the fact the company is doing very well (compared with when he took over) he suggests “there is still so much more to do”.
Shareholders can take some comfort from this because the loss of Gordon from Mothercare would undoubtedly be a blow as he has been the architect of its resurrection, which has seen him take it onto Happy High Street where it currently trades almost all alone.
glynnd@theretailbulletin.com
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