Mothercare still lossmaking but digital and international ops drive improvement

By

Sandra Halliday

Published
May 18, 2017

Mothercare reported its latest full-year results on Thursday and had plenty of good news with the second half having returned to underlying profit in its core UK operations. The mother-and-child specialist’s focus on digital also helped position it for future growth with 41% of its sales now coming online after a 7.8% rise last year.

Any more good news? UK comparable sales rose 1.1%, the margin was up 54bps, 70% of the store estate is now in the newly refurbished club format, 10 new websites opened around the world and international total sales growth was 10.6% to £762.5m.

But its wasn’t all good news and the firm’s shares fell in early trading after the results were announced. Why the drop? Total UK sales dipped slightly to £459.4m and the underlying UK loss was £4.4m, although that was a 31% improvement year-on-year. And while international sales rose, comp sales fell by 4.1% with much of that double-digit total sales rise accounted for by currency effects rather than a better performance.

CEO Mark Newton-Jones stayed positive though and said: "We are now in the third year of our turnaround and I am pleased to report that we have achieved much of what we set out to do from our six pillar strategy introduced in 2014.  While we are proud of what we've achieved to date, we believe we are only half way through the transformation of the Mothercare brand.

He added that following a difficult start to the year, the UK recovered in the second half, returning to underlying profit for the first time in six years. International markets showed signs of recovery with strong growth in Russia and Indonesia, and a sales recovery in China, albeit the country is yet to return to positive cash profit. The Middle East continued to be “economically challenging”.
 
Importantly, digital revenue is currently on a trajectory to be over half of its turnover with 83% of traffic coming from mobile. Store numbers are being reduced steadily, with the CEO saying they “will reduce over time as we focus on a regional presence in key conurbations across the UK.” But Newton-Jones stressed that stores still count, outlining a vision that could be repeated across the retail sector as the digital revolution continues. “We are clear in the role our stores will play for the future, by offering specialist advice and service and first class product presentation,” he said.