Mothercare warns over profits as drop in store visitors hurts sales and margins

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MOTHERCARE has warned that full-year profit would reach only half of what analysts had expected, after record Christmas discounting and a drop in visitors to its stores hit sales and margins.

The surprise statement sent shares down 30 per cent, wiping £112m off its stock market value and adding pressure on chief executive Simon Calver, who is trying to restore the UK division to profit in the face of fierce competition from online rivals and supermarkets.

Mothercare joins other retailers such as department stores group Debenhams to post disappointing post-Christmas updates, reflecting tough competition and pressure on consumer finances, though some in the sector have still managed to defy such factors with a healthy performance.

Mothercare, which sells prams, pushchairs and car seats and makes about 70 per cent of sales in Britain, said on UK like-for-like sales fell 4 per cent in the 12 weeks to January 4.

Total group sales, which includes its international business, fell 6.1 per cent.

“We’ve seen footfall down, in our major markets clothing is down, toys are down and home and travel is slightly down as well,” Mr Calver said.

“But the key thing on top of that is there has been lots of other promotional activity with late purchases coming into Christmas that has driven a lot of margin challenges.”

Margins are expected to be down around 200 basis points for the full year, added Mothercare, which had run offers including a 20 per cent discount on clothing in the Christmas period.

The firm said it expected group pre-tax profit for the year through March would likely be £8m, ahead of a restated £5.9m posted a year earlier but half of analysts’ forecasts of £16m.

“Clearly these results have been disappointing, I think they reflect the nature of a turnaround where you get bumps in the road, however we feel absolutely confident in our plan,” Mr Calver said, adding shareholders remained supportive.

Mothercare said economic volatility and currency deflation at its overseas businesses had also added to its woes in Britain, where the group said the toy market was weak.

The group has been closing loss-making stores as well as investing in new products, service and online to restore fortunes.

Shares closed at 291.50p.