Mothercare has warned of volatile trading at its international businesses after its Irish franchisee entered the local version of bankruptcy protection.
Mothercare Ireland, which operates 18 stores and employs 276 people, is to restructure under the protection of the court and interim examiner Declan McDonald of PricewaterhouseCoopers.
The company, which made a loss of €400,000 (£284,000) in the year to 28 March, wants to renegotiate high rents and extract itself from onerous leases.
The Irish franchise contributes less than 5% of the main Mothercare group’s sales and a spokesman said it was not a material part of the group’s business. The franchise owes money to Mothercare in the UK, which has extended credit terms as it tries to support the Irish company.
The UK firm blamed problems in the Middle East and Latin America for a 4.8% fall in sales at its international business in the 15 weeks to 11 July, the first quarter of Mothercare’s financial year. It said its Asian and European businesses both saw growth in constant currencies.
Mark Newton-Jones, the group’s chief executive who has been trying to turn around the fortunes of Mothercare after a difficult few years, said: “Trading across our international business has been more volatile, as we have previously highlighted, with increased macro headwinds impacting consumer confidence in a number of our markets.
“Despite this, our international partners are building on the strong foundations already in place by continuing to open new space, positioning us well for the future when the outlook improves.”
But shares in Mothercare dived 7.6% on Thursday to 265p after it revealed a slowdown in sales growth at established UK stores to 1.3% compared with 5.1% in the previous quarter.
Newton-Jones said Mothercare had improved its profit margins by controlling its stock and holding back on discounting so it could take advantage of full-price sales during the belated spell of warm weather.
“Our strategy in the UK is continuing to deliver results,” he said. Mothercare returned to profit last year on the back of strong demand in Asia and the Middle East.
