Mothercare shares slump 20% on plunge into red
Shares in Mothercare plunged up to 20% to their lowest in 14 years after the baby goods retailer swung to a first-half loss and warned of weak trading in its international business.
The group’s adjusted loss before tax for the 28 weeks to October 7 came in at £700,000 (€789,150), compared with a profit of £5.9m last year.
The results were dragged down by weakness in the company’s international business even as it spends heavily to revive sales at its UK stores amid stiff competition. In the UK, like-for-like sales were up 2.5% in the first half, but high expenses at the business resulted in a £9.6m adjusted loss.
Total international sales decreased 1.7%, while profit slumped 28% to £14.9m. The Middle-East region, where Mothercare operates 350 stores, remained a concern for the company as people spent less at its stores.
“[The] Middle East is dragging down our overall performance overseas; there is no clear sight as to when things will bottom out in that region,” the retailer said.
Mothercare also pointed to weakness in the UK, heading into the crucial holiday shopping period. “Towards the end of the reporting period, and in subsequent weeks, we have seen a softening in the UK market with lower footfall,” Mothercare, which was set up 56 years ago, said.
There was better news for other British shop sales, which rebounded in November, and retail chains were more optimistic despite signs of severe inflation pressure, the Confederation of British Industry said.
Retailers also became more confident about the month ahead, with the balance of expected sales hitting a two-year high. Still, quarterly figures from the CBI pointed to an uncertain outlook, with the net balance of retailers reporting rising prices hitting its highest level since 1991.
“Ahead of the crucial run-up to Christmas, the weaker pound has pushed up prices and retailers are nervous about business conditions and are trimming their workforces,” said CBI chief economist Rain Newton-Smith said. Official figures showed the UK economy expanded an annual 1.5% in the third quarter, the joint weakest growth in more than five years. Growth was driven by spending by households which rose at its fastest pace in a year.
Reuters
