Mother & child product retailer Mothercare is to cut its UK property portfolio by more than a quarter, it announced today as part of full-year preliminary results.
Although group sales for the owner of Mothercare & Early Learning Centre (ELC) stores increased by 3.6 per cent to £793.6 million in the 52 weeks to March 26th 2011, all growth in the company is currently coming from overseas operations.
The UK-based retailer is to close 110 in-town stores - it has nearly 400 UK stores in total - over a two-year period, with 90 closed this year, which will result in an estimated circa £18 million saving in occupancy costs.
Just a day after the government launched a new initiative headed by TV personality Mary Portas to save the British high street, many will see the withdrawal of such a major retailer from so many town centres as a further blow to UK retail.
Ben Gordon, CEO, said: “Over the last three years we have been reshaping the UK business for a changing retail landscape by downsizing the in-town property portfolio and growing Direct and Wholesale.
“Today we are announcing plans to accelerate our UK property strategy and transform the store portfolio over the next two years, benefiting from the unique position of having over 40 per cent of our high street leases expiring by March 2013.
“This will substantially reduce our exposure to the UK high street, further reduce operational leverage and allow us to focus on out-of-town Parenting Centres, Direct and our new wholesale business.”
Group underlying profit before tax fell 23.4 per cent compared to last year, whilst overall profit before tax dropped from £32.5 million in 2010 to £8.8 million this year, largely down to the group’s poor domestic performance.
Along with the store closures Mothercare hopes to secure 40 rent reductions by March 2013 by which time the group hopes that its restructuring plans will have resulted in a £4 million to £5 million uplift in UK profit per annum.
Mothercare hopes the costs reduction programme will save a further £5 million each year, whilst its domestic focus will now turn to expanding its multichannel offering through its recently launched ELC website and new Mothercare site which is due to be unveiled next year.
Whilst bricks and mortar becomes less of a concern in the UK, international store numbers are to continue to grow over the next few years.
Total international sales jumped 16.3 per cent year-on-year over the last 12 months to £570.9 million, with the group now operating more than 894 outlets in 54 countries.
Gordon continued: “International has had another record year with total International sales up 16.3 per cent and the business continues to go from strength to strength.
“We are on track to meet the International growth targets set out in December and we are announcing today plans to enter Latin America for the first time later this year.”
Over the 52 weeks 166 new stores were opened internationally and this year another 150 are scheduled to be unveiled, helping overseas retail sales increase by 15-20 per cent.
Thanks to this strong global performance Mothercare has increase its total dividend by 8.9 per cent compared to last year to 18.3p per share.