Mothercare reports improved trading in fourth quarter
Mothercare said it would meet its full year underlying profit forecasts after seeing an improvement in trading in both the UK and overseas in its fourth quarter.
In the 12 weeks to 29 March 2014, total group sales rose by 0.6% although worldwide network sales edged down 2.5%.
The retailer said both like-for-like and online sales had improved in the UK since the third quarter. However, sales fell by 0.3% on a like-for-like basis and by 4% on a total basis compared to the same period last year as the retailer reduced its store space by 3.8%. Online sales grew by 1.8%.
Mothercare’s international business saw an improvement in constant currency sales to 9.8% but in moving currencies sales dropped by 1.8%.
Never Miss a Retail Update!The retailer said it expects the environment to remain “competitive and promotional” in the UK and that the effects of currency devaluation oveseas will continue into the new financial year.
Mothercare chairman Alan Parker said: “After a difficult Q3, it is encouraging to note that we have seen some improvement in trading for both international and the UK.
“In the UK we have continued to close loss-making stores and focus on a lean retail operation. We are increasingly moving to a multi-channel business with 29% of the sales mix, up from 25% in the previous year, attributable to our Direct business. UK like-for-like sales and margins are in line with expectations for the quarter, despite continued pricing-pressure in Home and Travel.
“We remain profitable at group level and are focused on eliminating UK losses whilst also continuing to exploit our growth potential across our international markets.”
During the quarter, the group appointed Mark Newton-Jones as interim chief executive following the departure of Simon Calver earlier this year.
Joseph Robinson, lead consultant at Conlumino, comments: “Perhaps inevitably, Mothercare’s statement is keen to emphasise the significant, and growing scale of the retailer’s international presence, which has helped it to remain profitable at overall group level. However, in the UK, while its results clearly reflect an improvement on the previous quarter, Mothercare’s new interim chief executive, Mark Newton-Jones, faces an uphill struggle to turn around the business.
“Reflecting the narrative over the last few years, Mothercare can take positives from its burgeoning and increasingly developed international business. While international sales were significantly dented by currency movements (international retail sales would have been 9.8% ahead in constant currencies), the retailer has built a strong and sustainable franchise model, with the Mothercare’s reach encompassing 1,441 stores across 60 markets.
“Despite a relative improvement in performance, Mothercare faces an uphill struggle to turnaround an ailing UK business, with strong competitive threats at both end of the spectrum. However, it is becoming clear that a burgeoning overseas presence – which has afforded the group vital breathing space in attempts to turnaround the UK business over past few years – will define Mothercare’s future.”
