Mothercare’s sales slide as headwinds hit Middle East business
Mothercare’s sales slid 15 per cent over the 26 weeks to 23rd September, following tough trading conditions in the Middle East.
The company, which recently reported a large loss after refinancing its debt, reported total worldwide retail sales for the period fell to £137.2m, down from £162.1m last year.
Mothercare’s share price slid over four per cent this morning as markets responded to the news.
However, the former high street favourite said adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) climbed 12 per cent to £3.6m, as it clamped down on costs.
Mothercare has licensed the brand abroad since its UK arm collapsed in 2020. However, this approach has run into headwinds recently. Today it warned performance in the Middle East is struggling due to legislative changes and tough competition.
The brand said this change will likely lead to further reductions in its store footprint as it tried to right-size its store footprint for sales.
Mothercare said: “We are acutely aware of the ongoing pressure exerted on our franchise partners’ profitability and the consequent need for them to reduce costs and the levels of investment they can make in their businesses.”
“This will likely lead to further reductions in our store footprint in some regions. We are working closely with our key partners to assist them with their recovery, ultimately benefitting both our own business and our franchise partners’ businesses when we eventually return to pre pandemic levels of trading.”
Nigel Parson, consultant analyst at Cavendish, said: “Today’s interims demonstrate the resilience that Mothercare has built into its business model with EBITDA rising 12 per cent despite a 14 per cent decline in franchisee system sales due mostly to a slow-down in key Middle Eastern markets, where geopolitical events are starting to add another dynamic to already changing consumer behaviour.”
“Mothercare continues to explore refinancing solutions, the final piece of the long-running balance sheet reconstruction project. Lender Gordon Bros remains supportive, and we anticipate a satisfactory outcome. Once this exercise is complete, then Mothercare can increase its focus on growing and diversifying its income streams with a business model that has been hard forged through adversity.”