Mothercare issues profit warning after plummeting Christmas sales

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Mothercare Christmas

Mothercare has issued a profit warning after a dire performance in in the UK during the run-up to Christmas, with consumer spending falling in both stores and online.

The maternity and babywear retailer said UK like-for-like sales plunged 7.2 per cent its third quarter period ending December 30, while online sales tumbled 6.9 per cent.

Total UK sales also fell 11 per cent during the quarter – which included the crucial Christmas trading period – reflecting a store closure programme linked to a turnaround plan.

Mothercare said that in the year to date, UK sales were down 4.5 per cent.

Meanwhile, with international trade continuing to be “challenging” for the retailer, its overall sales fell 2.4 per cent in the quarter.

As a result, Mothercare now expects adjusted group profit for the year to be between £1 million to £5 million.

The news comes as Mothercare also issued profit warning in its trading update in November, which saw the retailer swing to an adjusted loss before tax of £700,000 for the half-year period October 7, compared to a profit of £5.9 million in the same time the year prior.

“As we signalled in November, there has been a softening in the UK market with lower footfall and website traffic resulting in lower spend in both stores and online,” chief executive Mark Newton-Jones said.

“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK.”

Newton-Jones added that Mothercare attempted to remain at full price ahead of Christmas, but then began discounting heavily and this chipped away at its profit margins.

“In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end of season sale,” he said.

“We have subsequently seen good progress with strong sell through rates on autumn/winter clearance lines albeit these carry lower margins and will lead to a further reduction in full-year margin as a result.”

Mothercare has been battered by weak consumer confidence brought about by inflation, which hit 3.1 per cent last month.

The retailer is also in the middle of reducing its UK store portfolio, aiming to bring it down to between 80 and 100 from 143.

Other aspects of its transformation plans includes investing in its store layout, supply chain and legacy systems, as well as plans to become a predominantly digitally-led business.

In total, 97 Mothercare stores are now in the modern “club” format as part of the transformation plan, representing 75 per cent of its UK store estate.

“In line with previous announcements and as part of our transformation strategy, we have taken decisive action to reduce our central cost base,” Newton-Jones said.

“The planned financial benefits of this will materialise in the next financial year.

“Whilst the performance of the business has been challenging in the last few months, we remain singularly focussed on transforming Mothercare to be the leading global retailer for parents and young children.”

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