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Mothercare 'starting to stablise' as Newton-Jones plans modernisation

Mothercare is “starting to stabilise” during its first period under Mark Newton-Jones, reporting its first like-for-like growth in seven quarters, as the new chief executive plans a series of modernising measures.

The British baby goods retailer grew like-for-like sales 0.9% in the 15 week period to July 12 2014. This is the first growth reported since October 2012.

However total group sales fell 1.8%, as the company began to move away from aggressive discounting.

International sales were up 14.7%, adjusted for currency fluctuation, but 0.8% on a non-currency adjusted basis.

Mothercare said it has moved away from “aggressive discounting, concentrating on full price sales” during the period.

In the UK, it said sales were “starting to stabilise”, but acknowledged that “by moving away from aggressive discounting and concentrating on full price sales” there had been a knock-on effect with online sales, “where most discounting has traditionally taken place”.

Chairman Alan Parker said he was confident that Newton-Jones, who joined Mothercare as interim chief executive in March this year and was confirmed in the role last week, would be able to turn the business around.  

“Mark has already made a substantial difference in many areas since he joined us, including the introduction of a new approach to trading and we have made an encouraging start to the year,” Parker said. “I am pleased that our International business has returned to double-digit constant currency growth and the UK has reported a small positive number for like-for-like sales growth.”

Newton-Jones highlighted the need for Mothercare to modernise, saying it requires “investment in its infrastructure, its stores and its head office systems”.  

“As a result many of the retail practices need updating, when we compare ourselves to more modern retailers. However, in spite of this, we still have high levels of customer loyalty and two great brand names in Mothercare and Early Learning Centre.”

As part of his 100-day review, Newton-Jones is planning to focus on cost reduction and cash generation, rebuilding gross margins, improving online and in-store service and improve the quality of product.

The group has 211 Mothercare and Early Learning Centre (ELC) stores in the UK. There are 854 international Mothercare stores and 411 ELC retail spaces across 60 countries, bringing the total number of stores owned by the group to 1,476, up from 1,358 at the end of the same period last year.

Mothercare has rejected two takeover bids from US chain Destination Maternity since May. The latest deal, offered on June 1, valued the business at £266m. Mothercare made no reference to the takeover bids in its interim results.Its AGM will take place today at 3pm.

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