Big freeze hits Mothercare profits

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The Independent Online

Retailer Mothercare today warned it will miss profit hopes after the big freeze prevented shoppers reaching its out-of-town stores.

The chain, which has 377 UK stores, said toy sales were particularly affected as December's Arctic blast wiped an estimated 4% off its UK sales figure for the final quarter of 2010.



UK like-for-like sales excluding VAT were down 5.8% in the 12 weeks to January 1, which led the retailer to warn that profits for the year to April were likely to be less than the City's expectations of £41 million.



Mothercare said UK sales in the final quarter of 2010 had got off to a strong start but were "impacted significantly" by the snow in December.



Finance director Neil Harrington said UK like-for-like sales were down by 21% in one week in December which was particularly badly hit by snow.



Mr Harrington said: "The snow was a pain in the neck. Our customers have young babies and pushchairs or are pregnant, and don't come out in the snow.



"The snow came right at the peak time for ordering toys for Christmas."



Not only did the Arctic weather keep shoppers at home during the key festive trading period, but it also forced the retailer to bring forward the cut-off point for Christmas deliveries to ensure customers received their presents on time.



Mothercare said its UK gross profit margin would be 1% lower than previously expected as it put on post-Christmas sales to clear excess stock.



Pre-tax profits for the year would be down by between 10% and 15% in the year to April as a result.



Sales have been strong since the snow went, added Mr Harrington.



The success of the group's international division continued in the quarter, with total international sales up 17.6%, helping to lift total group revenues by 0.4%.



Mothercare's overseas sales outgrew those of the UK for the first time earlier this year.



It has opened 157 overseas stores so far this year, taking the total to 885, including its first stores in Syria and Georgia, which were opened in recent weeks.



Fellow retailers Next and HMV have also said the snow hit their December sales.



Shares in Mothercare were down 5% following today's update.



Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: "Despite growing international sales, an already challenged UK business now forms another victim of the cold weather.



"The group's shift towards out-of-town premises appears to have worked against it, whilst like rival Next, the fragilities of time-critical, direct online Christmas sales have been exposed.



"In all, a mild profits warning will do little to cheer frost-bitten investors."

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