Mothercare's boss isn't prepared to throw the baby out with the bathwater despite stalling sales

 
Oliver Gill
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Mothercare's results have been hit by "challenging" market conditions (Source: Getty)

Shares in high-street darling Mothercare fell over one per cent after its chief exec said both sales and profit margins had "stalled" over the last six months.

The figures

Half-year UK like-for-like sales fell by 0.7 per cent from £237m to £231m. International like-for-like sales fell by 2.9 per cent but increased in actual currency terms, up by 7.1 per cent to £406m.

Group underlying profit before tax fell by 15.7 per cent from £5.9m to £7.0m

However, profits were wiped out by a £6.7m exceptional charge – this wasn't as bad as it could have been after being boosted by foreign currency movements by £4.5m

The firm went from having net cash of £27m to net debt of £16m.

Read more: Mothercare is expected to report a slump in profits this week

Why it's interesting

The sales numbers will attract market attention despite being sign-posted earlier this week.

The admission by Mothercare's boss that the firm hasn't been able to grow either sales or profit margins – the amount of money it makes on each product sold – is unlikely to please investors.

The exceptional charge – which in gross terms was £10.7m – related to a write down of property warehousing and international stock as well as a provision in China.

£4m of the gross provision relates money owed to the firm from Chinese trade customers that it no longer feels it will be able to recoup.

Around 40 per cent of sales in the UK are made via Mothercare's online app and website. The firm has made a strategic objective to push its digital offering.

Bricks and mortar outlets have not been completely left behind. Mothercare completed 32 store refurbishments taking the total number madeover to 91, or 60 per cent of their high street footprint in the UK.

Read more: The BHS brouhaha continues: Former Mothercare boss to bid for retailer

What the company said

Chief exec Mark Newton-Jones said:

The last six months have been challenging and, not withstanding our progress with our strategic pillars, our sales and margin stalled in the period.

There are two factors at play here - firstly the widely reported slowdown in sales across the high street due to unseasonal weather through the spring/summer season, resulting in higher markdown.

Secondly, whilst our planned warehouse infrastructure change has been successfully completed, it did mean a reduced flow of product for eight weeks in the summer and a one off increase in operational costs as the systems bedded in.

While conditions in the first half have been challenging, the second half has started in line with our plans and the business is well prepared for the important peak season.

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