Wednesday, February 20, 2019

Mothercare LFLs flat as turnaround continues


Parent & child products retailer Mothercare saw like-for-like (LFL) sales in the UK remain flat in its fourth quarter as the business acknowledged it had “much to do” within its turnaround plan.

In the 11 weeks ended March 30th 2013, total UK sales declined 5.1 per cent and fell 9.2 per cent in the full year as the retailer continued its store closure plan ahead of schedule.

Over the 52 week period, Mothercare closed 56 loss-making stores, 14 of which closed during Q4, exceeding its target for the year by six and the retailer noted that the impact has been limited thanks to a strong performance across its Direct in Home business.

Direct sales rose 18.2 per cent over the quarter and were up by four per cent in the full year as the retailer improved its delivery proposition while implementing “strong promotional offers”, it said.

However, James McGregor, Director at retail consultancy Retail Remedy, warned that more needs to be done to improve Mothercare‘s digital profile.

“If there‘s one clear message that Mothercare should take from this, it‘s that online is a potential saviour,” McGregor said.

“Robust Direct in Home sales should show the retailer the way forward.

“However, even online its price message is confusing to the customer: the landing page for its website has nine different promotional activities on it when all it really needs to say is ‘we will not be beaten on price‘.

“Before Mothercare can truly get back on track it needs to define who its target customer actually is and then streamline its business to their needs.

“In the mind of consumers, the Mothercare brand has aged. It‘s perceived to be outdated, overpriced and of average quality.

“Step into its stores even today and it‘s doing little to shake off this perception.

“It‘s an analogue retailer in a digital world.”

Nonetheless, underlying pre-tax profit for the full year is in line with market expectations and CEO of Mothercare Simon Calver noted that the appointment of Matt Smith as Chief Financial Officer a fortnight ago is set to strengthen the business‘ footing in a tough climate.

Calver added: “Mothercare has continued to make progress both in the UK and across its international businesses.

“We continue to be focused on delivering cash margin. International delivered double-digit growth despite the challenges of the Eurozone and we remain excited about the growth potential for all our International regions.”

International retail sales, excluding Australia and New Zealand, grew by 15.3 per cent in constant currencies during the fourth quarter while 115 stores were opened during the year.

At the start of this year, Mothercare‘s Australian business entered administration as trading conditions deteriorated in the country and the retailer has now announced that the business will cease operating.

In the coming months then, all 74 stores in Australia and New Zealand will close, though Calver said that the company remains confident about its growth potential for all international regions despite such setbacks.

“We are just 12 months into our three-year Transformation and Growth plan and while we still have much to do, our business is already on a firmer footing,” Calver explained.

“Despite our continuing caution with regards to the outlook for consumer spending in the UK and the Eurozone, we can look ahead to the new year with confidence.”