Baby products brand Mothercare has revealed it swung to a loss over the latest year as it is set to complete a refinancing of its debts after interest rates shot up.
The retailer said it was taking longer to return to pre-pandemic sales levels.
Mothercare, which sells its ranges through retail giant Boots in the UK and has franchised stores across the globe, has been working on a transformation plan for a number of years.
It reported a 16% decline in worldwide retail sales to £322.7 million over the year to March, compared to £385.3 million the prior year.
The decline was driven by challenges in its Middle Eastern markets, which includes Qatar and the United Arab Emirates, as well as its exit from Russia following the conflict in Ukraine, the firm said.
It reported a statutory loss of £100,000 for the year, from a profit of £12.1 million the prior year.
The London-listed business undertook a major restructure at the start of 2020 which saw it shut its 79 UK stores.
The pandemic had a big impact on the group with its franchise partners having to clear old inventory, reduce costs and lower the level of investment it can make in Mothercare, it cautioned.
“This is likely to mean that the return to pre pandemic levels of trading will take longer and we are working with our partners to assist that recovery,” it said.
Mothercare said it expects to complete a refinancing of its debt shortly and is in discussions with a number of stakeholders and financing partners.
It comes after the interest rate on its existing £19.5 million four-year loan facility shot up to 19.2%.
It stressed it does not need additional liquidity, but that it would be “preferable to accommodate business development and unanticipated challenges”.
The group is targeting an operating profit of £10 million from its franchise operations.
Some 30 million babies are born each year across the globe, which presents opportunities for the brand, it said.
Mothercare said it is still not operating in eight of the top 10 markets in the world, ranked by wealth and birth rate.
Clive Whiley, Mothercare’s chairman, said: “We have a compelling market opportunity.
“Mothercare remains in an unparalleled position of being a highly trusted British heritage brand, with a significant opportunity to leverage this brand equity and grow our global presence beyond our existing franchise network.
“There is still work to do, but we are excited about the future prospects for Mothercare as we leave behind the turmoil of recent years.”
Mothercare hired chief executive Daniel Le Vesconte at the start of the year, but said his appointment was terminated after it failed to impact the business as expected. It is currently searching for a new boss to take the reigns.
Press Association – Anna Wise