Mothercare forecasts “small” profit despite 40% sales drop

Mothercare's UK division has been in administration since November 2019
// Mothercare expects profit for 2021 despite 40% sales drop
// It recorded a “small” EBITDA profit growth in its pre-close trading update
// Mothercare significantly reduced its net debt to £12.1m at the year end

Mothercare has predicted that it will see a profit this year despite a 40 per cent drop in sales.

The maternity care retailer reported a “small” EBITDA profit growth in its pre-close trading update.

Retail sales declined by 40 per cent to £326 million in the year to March 27 after the impact of Covid-19 hit its various markets around the world.

READ MORE: Mothercare enters junior stock market

Mothercare’s UK division has been in administration since November 2019. The business was subsequently wound down in February last year, resulting in 79 store closures and 2500 redundancies.

Mothercare reported a pre-tax loss of £4.4 million for the six months to October 10, from a £4 million profit the year before.

The improved outlook comes despite net worldwide franchisee retail sales falling 40 per cent to £326 million year on year as a result of the Covid-19 impact in the UK and the 40 international markets in which it operates.

Mothercare also said it had significantly reduced its net debt to £12.1 million at the year end.

“As a global brand the impact of Covid-19 has varied enormously by market as the countries in which our franchise partners operate have addressed the Covid-19 pandemic in many different ways, including restrictions on travel, movement and operating hours of retailers,” Mothercare said.

“These issues have been compounded by similar restrictions for our manufacturing partners, which, coupled with the disruption to the global movement of freight, have caused additional challenges with availability of product for franchise partners further impacting sales for the year.”

After closing all of its 79 stores and website, the UK arm of the business now operates as a franchise subsidiary of the overall group.

In August last year, Mothercare confirmed a franchise partnership with health and beauty retailer Boots, which saw Mothercare products being rolled out on Boots’ website.

The Mothercare range also appeared in over 400 Boots stores.

Mothercare chairman Clive Whiley said: “Our performance in 2021 shows that, while we are not immune to the impact of the pandemic on our franchise partners’ operations around the world, we have ended the year in a far stronger position than we started it.

“Our resilient performance and financial position bears out the robustness of the Mothercare business today, delivering what will be a positive if modest EBITDA result for the year.

“We enter 2021/22 as a conservatively financed, cash-generative and profitable business.

“We expect 2022 to be a year of further progress, and we can now focus upon developing our strategy and future plans to optimise the competencies and attributes of Mothercare over the next five years.

“That is an exciting prospect for all of our staff and stakeholders as we hopefully exit this most uncertain of times.”

Mothercare will release its preliminary results for the year to March 27 this July.

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