Mothercare issues profit warning

Mothercare - Paul Faith/PA Wire
Mothercare - Paul Faith/PA Wire
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Mothercare has warned over profits after UK sales plunged in the run-up to Christmas, with consumer spending falling in both stores and online.

The baby retailer said UK like-for-like sales plummeted 7.2% in the 12 weeks to December 30, while online sales tumbled 6.9%.

As a result, Mothercare now expects adjusted group profit for the year is likely to be in the range of £1 million to £5 million.

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. This trend has continued.

“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK.”

Retailers have been hammered by weak consumer confidence off the back of soaring inflation, which has hit 3.1% following the collapse in the pound after the Brexit vote.

Total UK sales also fell 11% over the period, reflecting a store closure programme linked to a turnaround plan. In the year to date, sales are down 4.5% in the UK.

Mr Newton-Jones added that Mothercare attempted to remain at full price to protect its “brand positioning” ahead of Christmas, but then began discounting heavily, which has eroded profit margins.

“In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end of season sale.

“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,” he said.

Group sales fell 2.4% as the firm described international trade as “challenging”.