Mothercare takes another dip as revival remains a work in progress

By

Sandra Halliday

Published
Nov 22, 2018

Time are still tough for Mothercare with the mother-and-baby products retailer’s half-year results on Thursday showing just how tough.

In the 28 weeks to October 6, the struggling company reported a group adjusted loss before tax of £6.2 million, worse than the £2.6 million of a year ago. But at least its next debt fell and its statutory group loss before tax came down to £14.4 million from £16.8 million in the prior year.

But this wasn’t exactly a report brimming over with good news and it’s no surprise that the firm’s sales fell almost 7% after it said that group sales worldwide fell 9.8% to £566.1 million and group revenue dropped 13.1% to £295 million. Constant currency retail sales were down 2% and international reported sales down were down 10.6% (with like-for-likes down 3.4% in the international business).

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However, it saw growth in the key markets of Russia, China and Indonesia and signed a new partner in India, with a long-term growth plan in place.

But the continuation of difficult trading conditions in the UK was the big story as UK like-for-like sales declined 11.1%, “reflecting wider market uncertainty and negative brand coverage in connection with the group's refinancing.” Total UK sales fell 14.3% to £196.2 million and even online UK sales dropped 7.8% to £81 million.

UPBEAT CEO

CEO Mark Newton-Jones was relatively upbeat though. ”Over this period, we have continued our relentless focus to transform Mothercare into a business that has a sustainable and relevant future for its global customer base,” he said. “We have completed the capital restructuring of the business, the UK store closure programme is well under way and due for completion earlier than planned, we are making our sourcing operations more efficient and our cost-saving initiatives are well on schedule.”

He said that “this momentum has allowed us to focus on revising the overall structure of the group, something which will help drive a greater focus on becoming a stronger global brand, with improved product design, marketing and distribution of Mothercare products around the world. At the same time, in the UK, the team will be singularly focused on managing trading and operations, as a typical franchisee would, with the objective of bringing the UK business back to profitability.”

He highlighted that the international business “is showing signs of recovery after a difficult few years and some core markets have moved into growth.”

DIGITAL FOCUS

In a number of its key territories he sees opportunities for more retail space, though the long-term growth driver will come from digital channels, “which are under-utilised in a number of our key regions.” 

Despite the UK e-sales dip, online sales internationally in the period grew by 21.2% in constant currency but the overall online sales mix across its international business is still only 4.1%, which is significantly lower than the 44.9% mix it has in the UK and suggests major growth potential.

The company is now trading online in only 26 of its 50 retail markets through a combination of Mothercare websites and shopping platforms such as Noon in the Middle East, and Tmall and JD in China. And it opened new Mothercare websites in Taiwan, Vietnam, Saudi and UAE during the period.

But despite the encouraging signs abroad, Newton-Jones stressed that the UK retail environment “remains very challenging and given the ongoing uncertainty with consumer confidence, alongside the short-term impacts of our operational changes and restructuring programme, we expect performance in the remainder of our financial year to remain volatile.”