Friday 26 July 2019 7:59 am

Mothercare share price slumps as retailer warns on profits

Mothercare today warned that profits will not grow this year as “fragile” consumer confidence and political uncertainty hurt the retailer.

Shares fell sharply on the news, down 8.9 per cent to just 18p, as investors sold out of the struggling high street store.

Read more: Mothercare in talks to spin off struggling UK stores

The baby products store has already closed around a third of UK stores over the last 12 months in a battle to stay afloat.

Today it warned UK sales had fallen 23.2 per cent in the three months to 13 July after the closures, leaving it with just 79 stores from 134 last year.

Like-for-like sales picked up 3.2 per cent but online sales fell 12.1 per cent year on year, losing iPad sales from those stores.

“The UK retail market remains challenging and though the rate of decline in LFL sales has moderated, margin investment in promotional activity has been necessary to stimulate sales,” CEO Mark Newton-Jones said.

“The impact of this has negated much of the margin benefits we had expected to materialise. Furthermore, we have observed a lower than expected transfer of sales following the CVA store closure programme which completed in early April 2019.”

He added that Mothercare aims to execute financing plans that will allow it to be free of bank debts by the end of the year.

“Our immediate priority is to complete the transformation of the business with a near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise,” Newton-Jones said.

Mothercare’s UK business has not turned a profit for more than 10 years, and Mothercare admitted UK margins are taking longer to recover than predicted.

The retailer said it was trying to find the “optimal structure” to spin off UK retail as an independent franchise.

International sales contributed to the gloom however, sinking 2.1 per cent year on year mainly because of flagging Middle East business.

Read more: Mothercare staggers as annual loss hits £87m

The retailer hosts its annual general meeting (AGM) later today.

Neil Wilson, chief analyst at Markets.com, simply said: “Dire stuff. Today’s AGM will not be suitable for children.”

Main image credit: Getty

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