Mothercare: Trading 'tougher than expected'
Mothercare today after it admitted trading conditions had been tougher than expected.
The baby products retailer said UK like-for-like sales were 1.9% lower in the 13 weeks to October 12, with margins squeezed by the highly promotional market in home and travel products.
Autumn and winter clothing ranges suffered the same warm weather challenges as the rest of the sector but gained market share, it added.
Shares fell by around 4% today after Mothercare described UK margin conditions as "more challenging than expected".
The retailer has 1,393 stores in 60 markets but closed five loss-making UK stores in the period as part of its plan to downsize to an estate of around 200 by 2015.
It currently has 191 outlets under the Mothercare brand and another 46 Early Learning Centre stores.
Total UK sales were down 6.9% as a result of the reduction in store space, but this was offset by sales growth of 12.4% overseas. Total group sales were 0.5% lower in the quarter.
Mothercare is overhauling its UK business with product launches including its own value clothing range, as well as feeding and pushchair products under the Innosense and Xpedior brands respectively.
Numis Securities said a resilient UK sales performance had been undermined by the increased margin pressure, although it believes some of this squeeze should prove temporary.
It cut its forecast for profits in the current year by £2m to £17m and by £6m to £33m for the following year.
Numis analyst Matthew Taylor said: "Whilst disappointing, investors should not overlook the significant improvements being made to the underlying business, notably greater price competitiveness, improved range architecture, store portfolio and cost efficiency."
Shares later recovered to stand 4% higher.
