Mothercare reports 3 per cent sales decline

Under-pressure retailer Mothercare today announced another drop in UK sales as it continues to flounder at home but flourish abroad.

The mothers-to-be, babies and children's goods group, which runs around 350 stores in the UK, said that like-for-like sales in its domestic market were down by 3% in the 13 weeks to January 7.

The figure is better than the 7% decrease reported in August and included a 5% increase in December, although this performance was helped by comparisons with the cold snap the previous Christmas.

Total global sales were down by 1.2% despite a 3% increase in its worldwide network. Mothercare has 1,000 stores outside the UK.

Today's update comes after a depressing 2011 for the group, which saw it place its entire UK business under review after half year losses of more than £80 million and the departure of chief executive Ben Gordon.

Executive chairman Alan Parker said: "In the UK, the better like-for-like sales performance was achieved in an increasingly competitive consumer environment.

"Additional promotional activity was successful in driving a 5% like-for-like sales increase in December."

No further store closures are planned but Mr Parker, who is running the company following the exit of Mr Gordon, said that "nothing was ruled in or ruled out". He expects to complete the review in the current quarter.

Today's figures were better than expected, causing shares to rise 2%, but Freddie George, a retail analyst at Seymour Pierce stockbrokers, said much will hinge on the retail review being carried out by Mr Parker.

Mr George said: "While the work is yet to be done, from the early hints it seems the review will focus on improving the UK's value, service and digital proposition, plus cost cutting. We suspect the review may not be radical enough to differentiate the UK business from its peers.

"Competing on price is not an option, we feel, as its product categories have been commoditised by online and the supermarkets. Improving service is only part of the solution as we believe the UK business really needs to reinvent itself."

Founded by Iraqi-born entrepreneur Selim Zilkha, Mothercare's first store opened in Surrey in 1961 and was floated on the stock market in 1972.

Still one of the most recognised brands on the British high street, in recent times the group's presence in growth markets in Africa and the Middle East has seen its international business outperform its UK arm.

In recent months stores were opened for the first time in Chile, Colombia, Iraq and Morocco, bringing the total number outside the UK to 1,000.

PA