Business

Mothercare share price falls 31% after profit warning

  • 8 January 2014
  • From the section Business
Pushchairs on sale at a Mothercare store Image copyright PA

Shares in Mothercare have fallen 31% following a profit warning as a result of Christmas discounting in the UK and weak economic conditions overseas.

Total worldwide group sales fell 6.1% in the 12 weeks to 4 January, with UK like-for-like sales down 4%.

Chief executive Simon Calver said "difficult" trading conditions in the UK and volatile international markets had been behind the sales fall.

In the UK, weaker footfall and price cutting hit sales and margins.

The drop in the share price wiped about £112m off the company's market value.

Mr Calver said full-year profits at the mother and baby products retailer were "likely to be below the current range of market expectations".

He said Mothercare's international trading had been hit by currency movements.

In addition, he said that some of its larger markets, such as Russia and the Middle East, had suffered from "unseasonal weather which impacted sales".

UK restructuring plan

Mothercare's internet sales fell by 1% after the company decided not to repeat last year's free delivery offer for the Early Learning Centre website.

Ishaq Siddiqi, market strategist at ETX Capital, said the move was a "bad call" by Mothercare.

Mr Siddiqi added: "Management now have to figure out a turnaround strategy or face the real likelihood of a fate similar to that of Comet and Woolworths."

Mothercare acquired the owner of the Early Learning Centre (ELC), Chelsea Stores Holdings, in 2007.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said Mothercare's takeover of the ELC business continued to cause difficulties with the toy market "extremely tough".

He said: "The full extent of the task ahead for the relatively new chief executive looks to have been laid bare."

Mr Bowman said previously "favourable analyst opinion" would "likely be reined in".

The retailer operates 191 Mothercare stores and 40 Early Learning Centre outlets in the UK. It also has 1,201 international stores across 59 countries.

It has closed 80 UK stores under its restructuring plan to date.

In November last year the company reported a £2m underlying profit in its half-year results and said its plan was beginning to work.

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