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Mothercare issues profit warning as sales slump

Troubled retailer Mothercare has issued a profit warning as UK sales fell 11% over the all-important Christmas trading period.

The maternity and kidswear retailer said UK trade for the 12 weeks to 30 December was impacted by “lower footfall and spend in stores and online” following a shift in consumer trends.

The business now expects adjusted group profit for the year to be in the range of £1m to £5m, down from previous expectations of £11m. 

UK like-for-like sales for the period fell 7.2% compared to 2016. UK online sales dropped by 6.9% and now represent 42% of total UK sales.

During the period the business reduced its retail space in the UK by 6% to 1.4m sq ft, as planned, comprising 143 stores.

International sales were down 3% in constant currency and down 6.8% in actual currency, but the retailer said key markets, such as the Middle East and Russia, showed “signs of improvement” towards the end of the period.

International online sales were up 8.5% in constant currency and 7.4% in actual currency. The business had 1,131 international stores on 30 December.

Total group sales were down 2.4% on 2016.

Mothercare said it had lower gross margins due to higher discounting over the three months, but there was a positive sell-through of stock and cash generation.

Mark Newton-Jones, chief executive of Mothercare, said: “In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end-of-season Sale. We have subsequently seen good progress with strong sell-through rates on autumn clearance lines albeit these carry lower margins and will lead to a further reduction in full-year margin as a result.

“In line with previous announcements and as part of our transformation strategy, we have taken decisive action to reduce our central cost base. The planned financial benefits of this will materialise in the next financial year. We continue to adopt a disciplined approach to cash management with a particular focus on controlling stock levels, together with stringent controls over capital expenditure.

“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK and on this basis the adjusted group profit for the year is likely to be in the range of £1-£5m. Whilst the performance of the business has been challenging in the last few months, we remain singularly focussed on transforming Mothercare to be the leading global retailer for parents and young children.”

Readers' comments (1)

  • Struggling to understand the businesses that focus on easy international growth at the expense of taking eyes off the U.K. offering. New Look such a good example of why this is folly.

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