Mothercare suffers another big loss but sees signs of recovery

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RETAILER Mothercare racked up another big loss in the UK yesterday but insisted there were signs that the business is on a “firmer footing”.

The group, which is jettisoning loss-making stores as part of a three-year restructuring plan, posted an underlying UK loss of £21.7m for the year to March 30 – £3m better than the same period a year earlier.

The performance of its larger international division, which trades from more than 1,000 stores in 60 countries, made up for the UK deficit as the group’s underlying profit improved to £8.3m from £1.6m a year ago.

During the year, Mothercare closed 56 UK stores – reducing its footprint by 7.2 per cent – and now trades from 196 Mothercare outlets and 59 under the Early Learning Centre brand.

More closures are expected as the company works towards a 200-strong estate by 2015, complemented by a stronger online division.

Chief executive Simon Calver yesterday described his first year in charge as both exciting and challenging.

He added: “I now have a full executive team in place and we are already making positive changes to the business.

“For all our customers, we are improving value, introducing new and more innovative products and investing in even better service.

“It is still early days, and our customers are already beginning to respond positively; buying more products on each trip and increasing their customer satisfaction scores.

“Online delivered 18.2 per cent growth during the last quarter as the new online platform and the upgraded delivery options to both stores and home began to take effect.

“Our international franchise partners continue to perform very well, driving both Mothercare and Early Learning Centre forward in 60 countries worldwide and delivering robust sales and profit growth.

“Our results reflect the progress we have made against our plans to reduce UK losses and deliver continued international profit growth.

“After the first year of our transformation and growth plan, the company is on a firmer footing. I look forward to building on this in the years ahead, as the world’s leading multi-channel mother and baby specialist.”

Alan Parker, Mothercare’s chairman, said: “It has been a busy and successful year in the transformation of Mothercare.

“The group’s profitability has improved, in line with our plans, and we have delivered the first phase of our transformation and growth plan.

“This has been achieved against a backdrop of considerable change within the organisation and subdued consumer spending.

“Our strong franchise relationships around the globe give us solid foundations for continued growth both in terms of sales and profits internationally.

“I look forward to the year ahead, confident that the group is moving in the right direction.”

Mothercare’s recent product launches have included its own value clothing range, as well as feeding and pushchair products under the Innosense and Xpedior brands respectively.

Its ‘Little Bird’ range, which is backed by TV chef Jamie Oliver’s wife Jools, has been extended this year.

Cantor Fitzgerald analyst Kate Calvert said she was unconvinced that the strategy will return the UK business to profit in 2015.

She added yesterday: “Management is undertaking this brand repositioning in challenging markets. Competition is fierce with most of Mothercare’s core product categories having been commoditised by pure online players and the food retailers.”

She believes Mothercare UK should re-invent itself as a social networking brand at “the heart of a mother’s community”.

Mothercare has stores across Yorkshire, including outlets in Leeds, Bradford, Halifax and Harrogate.

Many UK retailers are finding the going tough as consumers, whose spending generates about two-thirds of UK gross domestic product, worry about job security and a squeeze on their incomes.

Commenting on the outlook, Mr Calver said yesterday, in a statement to accompany the results: “Trading conditions and consumer confidence remain weak in the UK and eurozone.

“In the UK, we will continue with our strategy to manage the business to cash margins while closing loss-making stores and taking out non-store costs.”