Mothercare's shares crash on drop in overseas sales

 

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The Independent Online

The impressive turnaround of Mothercare has hit some serious teething problems as the mother-and-baby retail chain’s international business suffered a rare fall in sales.

Mark Newton-Jones, the chief executive, has spent the past year attempting to prop up the retailer’s UK business and has vowed to turn it into a profitable brand once again.

However, the once-stalwart international arm – which has been subsidising the UK division for years – suffered a perfect storm of problems.

Consumer confidence in the Middle East dropped, an early Ramadan and Eid kept shoppers away, while the weak euro and continuing sanctions in Russia also hit sales.

The issues laid bare sent the shares down nearly 6 per cent to 270p last night, after a storming run this year that has seen the price rise more than 60 per cent since January.

International sales fell 4.8 per cent in the 15 weeks to 11 July on an actual currency basis, despite an increase in space by 8 per cent. Mothercare has 1,299 stores across the world.

Mr Newton-Jones explained: “Trading across our international business has been more volatile, as we have previously highlighted, with increased macro headwinds impacting consumer confidence in a number of our markets.”

In the UK, bosses continued to shut down poorly performing stores, having vowed to shut a quarter of all shops last year. There are now 180, mainly in bigger retail parks, as the company aims to move away from the high street.

Sales during the period in the UK fell 0.9 per cent. However, a strong performance by its online operation helped save face, with web sales rising 23.9 per cent.

The business was helped by the warmer weather, meaning more products have been sold at full price, although there is currently an “up to 50 per cent off” sale.

Mothercare has spent years trying to win over more customers through its tie-ups with celebrities and by offering big discounts.

However, profits have been harder to come by and Mr Newton-Jones says that he wants to wean the company off its reliance on discounts and promotions and push more high-end, exclusive products, particularly in clothing where margins are much higher than other goods.

He said: “Our strategy in the UK is continuing to deliver results. We have delayed the end-of-season sale to take advantage of well-controlled stock and the warm weather to sell more at full price.

“As a result, margins are improving without adversely affecting like-for-like sales. Online has also benefited from lower discounts and promotions with the additional benefit of improved functionality.”