Mothercare's UK business returns to underlying sales growth

LONDON, United Kingdom - Struggling British mother and baby products retailer Mothercare, the subject of bid interest from U.S. group Destination Maternity, said its UK business returned to underlying sales growth in its first quarter.

Mothercare, which operates in 60 countries but has been hit hard by cut-price competition from supermarket groups and online retailers in its main UK market, has rejected two bid proposals from its U.S. suitor, saying they undervalued the company and its prospects.

The firm said on Thursday sales at British stores open over a year rose 0.9 percent in the 15 weeks to July 12, its fiscal first quarter, compared with the same period last year.

Sales in its overseas division were up 14.7 percent in the period on a constant currency basis but increased 0.8 percent on a reported basis.

The figures compared to a 0.3 percent decline in the UK in the fourth quarter of its 2013-14 fiscal year and a 9.8 percent sales rise in constant currency overseas.

Mothercare has been trying to revive its loss-making UK business by revamping stores, closing weaker ones and expanding online, however improvement has been slow to materialise.

Mark Newton-Jones, who took over as interim boss in March after Simon Calver quit, was named permanent chief executive earlier this month and is reviewing the business once again.

The new CEO said on Thursday the UK business needs modernising and requires investment in its infrastructure, its stores and its head office systems.

Shares in Mothercare, down 41 percent over the last year, closed Wednesday at 279.5 pence, valuing the business at 248.3 million pounds.

Destination Maternity's second bid proposal was pitched at 300 pence a share.