Turnaround for Mothercare? Higher sales in the third quarter indicate a change in fortunes
Mothercare's like-for-like sales in the UK rose 1.1 per cent in the third quarter, indicating the babycare retailer's troubled spell may be coming to an end.
Total UK sales fell 1.9 per cent in the 13 weeks to 9 January, but when you factor in the closure of 4.2 per cent of the company's outlets during the period, the result looks positive.
Online sales performed particularly well, jumping 16.1 per cent and making up 31.8 per cent of the total UK business.
The future also looks bright for Mothercare at the international level, with foreign business growing 14.4 per cent during the quarter.
Why it's interesting
Mothercare has been having a tough time of it over the past few years, only registering its first revenue growth in seven quarters last summer. The situation had got so dire that chief executive Simon Calder stepped down, with former Shop Direct boss Mark Newton-Jones being parachuted in to pick up the pieces.
In July last year, US company Destination Maternity made a bid for the business, but it was rejected twice. Instead Newton-Jones and the team opted to raise funds through a deeply discounted rights issue to pay down debt, and announced plans to close 75 stores across the UK.
Despite Newton-Jones being widely respected for his work in transforming Shop Direct into a forward-thinking etailer, there were reservations about whether Mothercare could survive unscathed.
The second quarter under his tenure showed another improvement in sales, however, with this set of figures adding strength to the argument that finally the baby business is rallying.
What Mothercare said
Newton-Jones said these latest results were “in line with the plan” he formulated after his first 100 days in the role, adding that he was positive about the company's future:
Importantly, in the UK, we have continued to reduce the level of promotional activity and went into the end of season sale on Boxing Day, with less stock and later than in recent years. These actions are re-establishing Mothercare as a full price retailer and in turn stabilising our margin. In international, we have seen continued strong growth from all territories, despite the economic uncertainty in some markets.While trading conditions remain challenging, we are continuing to make good progress on our strategic plan. Our vision is clear – to be the leading global retailer for parents and young children.
Mothercare is in an increasingly competitive sector, but Newton-Jones appears to have won over investors with his new strategy. Now he just has to make sure that customers are convinced enough to buy full-price products from a business that has until recently been heavily promotional.