More work is required at Mothercare PLC (LSE:MTC) if it’s to reach previous highs, said Shore Capital following the release of its first half results today.
"A lot of business development is required to return to previous levels of turnover and profitability during a macro backdrop,” said the broker.
Difficult work so far has already been undertaken, most notably unwinding its operations in Russia following its invasion of Ukraine.
While the analysts are pleased to see Mothercare rebuilding its business post-pandemic it said it “cannot ignore the current outlook where the gap between earnings and inflation growth is widening at various speeds” in markets.
Despite this, the financial outturn for the first half of 2023 makes for “reassuring reading,” especially given the “significant” headwinds facing the business.
In its first-half results, Mothercare outlined ambitions that were welcomed by Shore Capital and focused on growth and higher returns.
“There is a potential prize down the line for Mothercare, where, should the business development pick up, set up against a structurally improved cost base, which could lead to margin expansion and stronger earnings growth.”
As a result, Shore Capital retains its current financial estimates and its 'hold' position on the stock, at least until full-year results in June.