Monday 23 September 2019

Mothercare cautions over ‘softening’ UK market as turnaround efforts continue

The retailer reported a pre-tax half-year loss of £16.8 million.

Mothercare results
Mothercare results

By Kalyeena Makortoff, Press Association City Reporter

Retailer Mothercare has warned over a “softening” UK market and reported widening half-year losses as it pushes on with turnaround efforts.

The baby care chain posted a pre-tax loss of £16.8 million for the 28 weeks to October 7, marking a significantly larger loss than the £800,000 reported a year earlier.

It came as the company worked on the latest “phase” of its turnaround programme, having taken charges on property and restructuring costs.

Total revenues also took a hit, falling 2.4% from £347.7 million to £339.5 million amid tough trading conditions in the Middle East and a transition programme that included store closures across its UK estate.

The company has been working to slim down the total number of UK stores to between 80 to 100 from 143, having shuttered 10 further locations over the past six months as part of those plans.

Mothercare instead turned attention to sales figures which showed a 2.5% rise in UK sales on a like-for-like basis, yet cautioned over weaker trading on its home turf.

Chief executive Mark Newton-Jones said: “Towards the end of the reporting period, and in subsequent weeks, we have seen a softening in the UK market with lower footfall and spend which is consistent with recent industry reports.”

“Not‐withstanding this uncertain consumer backdrop, the Mothercare brand, whilst not immune, is in a stronger position with a much‐improved product and service offer and a more robust business model.”

Retailers have been concerned over weaker consumer confidence on the back of higher inflation which has surged to 3% on the back of the Brexit-hit pound.

Mr Newton-Jones assured that Mothercare’s transformation plans were “on track”, highlighting a 5.3% rise in online sales, which now account for 42% of its overall UK sales, up from 40% a year earlier.

Shopping via mobiles had also increased, making up 82% of online sales.

“Across the business, we continue to invest and make progress, developing the Mothercare brand into a digitally led, global specialist,” the chief executive said.

Mr Newton-Jones told the Press Association there were likely to be four to five further store closures over the next six months, and that the business is pushing forward with the restructuring of its central office, which is expected to result in 150-200 redundancies by the end of the financial year.

It will leave Mothercare’s central operations with around 600-650 staff.

When asked when the company would next turn a bottom line profit, he said he was not providing guidance but would be keeping an eye on how consumers behave in the coming months.

“From an international point of view, we think half of the losses that we’ve seen in the first half we will recover as a result of shipping of goods as well as a bit of currency movement, so it’s really going to be a play on the UK and how the UK performs.”

But despite warnings of lower UK growth from the Office for Budget Responsibility alongside the Chancellor’s speech this week, Mr Newton-Jones said his view was unchanged.

“I’m no more optimistic and no more pessimistic. I think what I saw yesterday was a little bit more money in people’s pockets because of the tax bands moving up marginally, potentially some movement at the bottom end of the housing market … (but) we’re in a pretty robust position I would say, in the face of any potential downturn that might come.”

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