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New Mothercare CEO Plans Aggressive Turnaround Effort

When Mark Newton-Jones took the helm of Mothercare in mid-July, the CEO quickly announced his plans to aggressively pursue turnaround initiatives for the U.K.’s troubled but improving retailer of apparel and accessories for mothers, moms-to-be, babies and children.

Last fiscal year ending in May 2014, Mothercare’s U.K. business reported annual losses of £21.5 million ($36.6 million) after sales fell 7.5%. A mix of top management changes, better annual sales and an improving bottom line have combined to boost share prices to twice the level they were in May.

Contributing in part to the doubling of Mothercare stock in less than a single quarter were two rejected bids to takeover the business. Mothercare’s chairman, board and two major institutional stakeholders–Fidelity and Allianz Global Investors–declined Destination Maternity’s first and second offer, both of which Mothercare considered too low. Like-for-like domestic sales have improved at the retailer, another element that factored into company’s higher stock price.

The stock surge came after several years of declining sales and loss of customers to discount retailers. When Mothercare’s previous CEO Simon Calver departed in February, after just under a two-year run, it suggested the firm would pursue new strategies and tactics under fresh leadership.

Newton-Jones has four major modernization initiatives on his agenda, including reducing costs and generating cash; increasing gross margins; improving customer service for online and in-store shoppers; and improving product quality.

Also considered is the closing of some 191 stores, a 20 percent reduction in hours for in-store personnel, and squeezing suppliers for better terms. Mothercare currently operates 1,221 stores in 59 countries.

Although its shares are up significantly as Newton-Jones begins his recovery program, Mothercare nevertheless must resolve its remaining challenges. Analyst Anusha Couttigane of Conlumino said this could be a make-or-break year for the company with Newton-Jones risking his reputation on the retailer at the most pivotal time in its history.