Mothercare sales still down
Core clothing range underperforming
October 15 2002
Mothercare has confirmed that the business continued to experience severe problems in the first half of its financial year.
While total group sales are up 0.7 per cent over the period, fuelled by improvements in the international and home shopping businesses over the past three months, the core UK clothing range was hit by ovestocking problems, and distribution costs remain high.
UK store like-for-like sales are down 2.1 per cent over the six months. The company said clothing continued to under-perform through the summer, but stocks were largely cleared through the sale, with the rest of the surplus stock moved to the new Mothecare clearance stores. Sales of autumn clothing ranges were hit by the warm weather in September, but are now selling well. Sales of home, travel and toy ranges have shown increases recently against weak comparatives last year.
The international and direct businesses have performed well, increasing sales year-on-year by 28.9 per cent and 10.2 per cent respectively.
The international business operates on lower margins than the UK, and combined with the need to clear summer lines at reduced prices, the group’s margins will be lower than last year, “but in line with our expectations.”
Distribution, which has been one of the key issues affecting the business following problems integrating a new UK distribution centre, is still not delivering the cost savings expected. “Mothercare’s primary focus in the distribution centres has been to ensure the volume and service requirements of the business are met, including the stock build for peak trading. Whilst these objectives are being achieved, the costs are not yet coming down as anticipated. Mothercare continue to work to reduce these costs as a matter of urgency, whilst protecting service levels,” said the statement.
New chief executuive Ben Gordon joins the business on December 2.
Mark McMenemy, finance director and acting chief executive, said “The first half has been disappointing in both sales and profit. However, as expected we are now seeing positive sales in each division as we enter the second half.”
