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Mothercare turnaround hits a wall 8 January 2014

Maternity retailer Mothercare plc’s turnaround plan looks to be struggling after the company today (8 January) issued a profit warning as sales and shares slumped.

In its interim management statement for the 12 weeks to 4 January, Mothercare saw UK like-for-like sales fall 4% and total worldwide group sales down by 6.1%.

More significantly, the retailer also announced that online sales dipped 1% during the period, with shares plummeting by 30% following the announcement.

Simon Calver, chief executive of Mothercare plc, said: “Difficult UK retail trading conditions and volatility in some of our international markets resulted in weaker than expected worldwide network sales this quarter.

“In the UK, our stores suffered similar Christmas trading pressures to those reported elsewhere. Weaker footfall and higher promotional activity led to lower sales and margins.”

The poor results come just three months after Mothercare announced its first return to profit since 2011, after posting underlying profit before tax of £2m for the six months to 12 October 2013, driven by increased sales in emerging markets.

Its turnaround plan has focused primarily on improving UK like-for-like store sales, which dropped 1.4% in the six months to October 2013.

The company has closed 63 stores in the UK as part of its restructuring programme.

Calver said: “As a result of lower UK sales and margin and the international currency impact, full year profits are likely to be below the current range of market expectations.

“We continue to focus on delivering a turnaround in the UK and exploiting the global growth opportunities for Mothercare.”

Head of external affairs at Company Watch, Nick Hood, said: “The unexpected reverse in international fortunes is an unwelcome development for Mothercare as it wrestles with its imploding UK bricks and mortar offering.

“Even more worrying for the management is the decline in online business, making them almost unique in reporting a drop in sales through this vital channel, even if the main problem here is the ELC offering.

“Under the circumstances, today’s profit warning and share price fall are the least of a broad range of serious and fundamental challenges which lie ahead.”

 

 

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