Mothercare warns over profits after sales fall over Christmas

The high-street chain now expects adjusted group profit for the year of between £1m to £5m

UK sales for the past year are down 4.5 per cent at the baby-product retailer (PA)

Mothercare has warned over profits after UK sales plunged in the run-up to Christmas, with consumer spending falling in both stores and online.

The baby-product retailer said UK like-for-like sales plummeted 7.2 per cent in the 12 weeks to December 30, while online sales tumbled 6.9 per cent.

As a result, Mothercare now expects adjusted group profit for the year is likely to be in the range of £1m to £5m.

Mothercare shares dropped more than 24 per cent on Monday morning following the announcement.

Chief executive Mark Newton-Jones said: “As we signalled in November, there has been a softening in the UK market with lower footfall and website traffic resulting in lower spend in both stores and online. This trend has continued.

“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK.”

Retailers have been hammered by weak consumer confidence off the back of soaring inflation, which has hit 3.1 per cent following the collapse in the pound after the Brexit vote.

Total UK sales also fell 11 per cent over the period, reflecting a store closure programme linked to a turnaround plan. In the year to date, sales are down 4.5 per cent in the UK.

Mr Newton-Jones added that Mothercare attempted to remain at full price to protect its “brand positioning” ahead of Christmas, but then began discounting heavily, which has eroded profit margins.

“In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end of season sale.

“We have subsequently seen good progress with strong sell through rates on Autumn Winter clearance lines albeit these carry lower margins and will lead to a further reduction in full-year margin as a result,” he said.

Group sales fell 2.4 per cent as the firm described international trade as “challenging”.

PA