Mothercare to miss profit targets
Mothercare has warned it will miss profit expectations after fierce Christmas discounting left it nursing a big drop in UK sales.
The babycare products retailer, which has 191 stores in its home market, blamed the “highly promotional” nature of the Christmas period and lower seasonal footfall for its disappointing UK performance.
Currency deflation in its overseas markets was also a factor as it reported that full-year profits will be short of City hopes.
UK sales fell 9.9% in the 12 weeks to January 4 – or 4% when recent store closures are stripped out from year-on-year comparisons.
Its internet operation saw sales fall by 1% after the company decided not to repeat the previous year’s free delivery offer and a weak toy market impacted on sales for its Early Learning Centre brand.
The update is a blow to the company’s turnaround hopes as it looks to reinvigorate its slimmed-down UK business with product launches such as its own value clothing range.
Shares dived by more than 25% following the update.
Mike Dennis, a retail analyst at Cantor Fitzgerald stockbrokers, said: “The UK baby clothing and equipment market remains very competitive, with few retailers in this category making any positive retail margins, especially as high street clothing chains, internet offers and supermarkets continue to grow space and share.”
The company is the second major retailer to warn on profits after Debenhams said on New Year’s Eve that it had failed to see an anticipated surge in sales in the final week before Christmas.
Mothercare chief executive Simon Calver described UK retail trading conditions as difficult and said the company suffered volatility in some of its international markets, such as Russia and the Middle East.
