Comments on: Big News at Headline Group

By: Dean Morel

Dean Morel — Sun, 18 Jul 2010 11:56:42 +0000

Thanks for the kind words Westwind and Sean

My exposure to Mothercare in the UK was that of a shopper. However, I do know the following. It’s a PLC, trading on the London Stock Exchange and as this chart shows it had a pretty great decade. As far as I know the stores were company owned. Ticker is MTC on the LSE.

The primary reason I haven’t yet bought in as people I know in retail are all telling me the same thing; trading conditions suck. I’m hearing some people say they are the worst they can remember in the last ten years. While baby related stuff always gets a premium and is considered (somewhat insanely) essential I’m not sure how affected their business will be. Management say the stores are doing better than expectations, but what was their expectation?

They are now well funded and operating in an area where they can grow quickly by acquisition and organically. Whether that creates value in the long term is questionable, but it normally does result in being able to sell at higher prices to another punter! Cynical perhaps.

The idea is they get you in to their stores and then you simply go there whenever you want something baby related as when you’ve got a baby you don’t have five hours to spend on the net!

By: Westwind

Westwind — Sun, 18 Jul 2010 10:59:19 +0000

Hi Dean

I think it boils down to do you buy their 3 year strategy. This was revised in their May press release and it looks like it will need to be revised again with this new activity.

I question the rate of change that is happening. Although it sounds positive, I just wonder if they can bed it down without a depth of experienced staff.

With your exposure to Mothercare in the UK, how was the business structured? Were the shops owned and run by the company or franchisees? Was the holding company listed and if so what was its track record like. If you don’t know, don’t worry, I can do some digging but thought you might already be across this.

Like Sean, I am pleased that you have been able to keep the site ticking over, in between all the other things you are trying to do.

Best wishes

Westwind

By: Sean

Sean — Sun, 18 Jul 2010 03:02:46 +0000

Hi Dean, it hasn’t broken out of the range yet. I like the business idea and have a small punt in it. I’ve had to really scale back my investing to a minute amount as I just don’t have the time at the moment. I have a stoploss at 20c on HLD. Other than that I haven’t had time to keep up with developments. Thanks for posting the update. The mothercraft equity injection at a fully diluted price of 28c? Sounds ok to me. The structure of HLD needs to be simplified which I think they are doing. The sector needs a bit of rationalising. I don’t know much about their early childhood centres, my gut feel is it is a dud. If it competes with Toys R Us then that is a lot harder than competing with baby’s galore. They have had the early childhood centres in various states for a while and from what I can see it is not a raging sucess. I think if they could get large motherhood centres going with distribution lines rationalised then they could keep some customers into early childhood, put the ELC in motherhood centre. With the mothercare website, it isn’t competing on a price point. I think their main competition will be with niche online dealers, eg pram warehouse for prams, nursing angel for lactation etc which are undercapitalised but undercut them on price significantly. I see they have opened a store in belrose Sydney so I’ll have to pop in and check it out! The time one can spend researching this stuff is just amazing. I spent 5 hours last night on the internet looking at what second pram to get.

Hope you and the family are well. Keep up the site, I think it’s great.