Mothercare warns on profit after decline in Christmas sales
Mothercare has warned on profit as it reported that its UK like-for-like sales declined by 7.2% in the lead-up to Christmas. In the 12 weeks to 30 December, UK online sales fell by 6.9%.
In a trading update, Mothercare chief executive Mark Newton-Jones said: "As we signalled in November, there has been a softening in the UK market with lower footfall and website traffic resulting in lower spend in both stores and online.”
UK total sales were 11% lower than the same time last year, reflecting the retailer’s ongoing store closure programme. Retail space at the end of the period was reduced to 1.4 million square feet as planned, to leave 143 stores.
Mothercare’s international retail sales were down 3% in constant currency and down 6.8% in actual currency, but the retailer said key markets showed signs of improvement towards the end of the period.
Newton Jones said international trade was challenging in the quarter overall. He added: “We have seen a return to moderate growth in the Middle East over the last seven weeks. Whilst this is positive news, it is too early to say whether or not this is the beginning of a more sustained up-turn in sales across the region. In Russia, our largest international country by turnover, we also saw a return to growth as the weather became colder, leading to improved trading.”
During the period, the company took a conscious decision to remain at full price to protect its brand positioning prior to Christmas but discounted more heavily in the end of season sale.
Newton-Jones said: “We have subsequently seen good progress with strong sell through rates on Autumn Winter clearance lines albeit these carry lower margins and will lead to a further reduction in full year margin as a result. Group cash generation and inventory positions are both strong.”
Looking ahead, Mothercare said it is not expecting any improvement in the short-term market conditions for the UK and it now anticipates that full year adjusted group profit is likely to be in the range of £1 million to £5 million.
Newton-Jones added: “Whilst the performance of the business has been challenging in the last few months, we remain singularly focused on transforming Mothercare to be the leading global retailer for parents and young children."
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