Mothercare reveals £103m loss
The uphill challenge faced by the new boss of Mothercare was
underlined today as a dismal UK performance dragged the parenting
retailer to a £103 million loss.
Presenting his first set of results, Simon Calver, who joined at the end of April, said he would be "ruthless" on costs as he rolls out a three-year turnaround plan.
The group saw like-for-like sales tumble 6.2% in the year to March 31 in the UK, where it plans to cut store numbers from 311 to 200 by 2015 in a bid to save £13 million a year.
A £55 million writedown on the value of the group's Early Learning Centre and nearly £10 million in UK restructuring costs triggered a bottom-line pre-tax loss of £102.9 million, compared with an £8.8 million profit the previous year.
Mr Calver, who came to Mothercare from internet movie rental firm Lovefilm, said: "We have a long way to go, and the plan to bring the UK business back to acceptable levels of profitability will take three years."
The new UK estate will comprise 95 out-of-town sites and 105 high street locations and will focus on profitable outlets, while head-office payroll costs will be cut by 16%.
The group has secured a refinancing deal with its banks HSBC and Barclays to fund the store reduction programme, increasing lending from £80 million to £90 million.
Worldwide network sales grew by 6.4% to £1.2 billion, driven by the growth of its international business but tempered by the continued decline seen in the UK.
After stripping out one-off costs such as the writedown on ELC, underlying profits plunged 94% to just £1.6 million.
The group gained some market share in home and travel in the UK through the year but the rest of the market was "particularly weak".
The group's international division continued to grow rapidly, with total sales up 18% to £672.4 million and underlying operating profits up 27% to £34.9 million.
As part of its turnaround plan, the group pledged to accelerate international growth through targeting new markets and focusing on key growth regions such as China, India, the Middle East and Latin America.
Mr Calver is likely to bring his online experience to the business after Mothercare launched its new UK website on May 1.
Looking ahead, the group expects international sales to continue to grow in the financial year to next March, with around 150 new store openings and sales growth of around 20%.
In the UK, Mothercare expects the consumer environment to remain difficult and reassured that it is "planning accordingly".
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