Shares in Mothercare have plunged after the baby goods chain reported that shoppers stayed away from its non-UK stores, particularly across the Middle East and China.
Mothercare, which has 170 stores in the UK and 1,310 overseas, said on Thursday that sales fell in all four international regions in the 11 weeks to 26 March. Sales were down by 9.7% measured at constant currencies and dropped by 10.8% in actual currencies.
In the Middle East, customers spent less because of the slump in oil prices, while China recorded weaker consumer confidence amid the country’s economic slowdown. Europe and Latin America were affected by adverse currency moves.
Mothercare is in the middle of a turnaround programme that doubled overall half-year profits in January and halved its UK losses. The shares fell on Thursday by nearly 20% to 152.5p.
The UK fared better, with like-for-like sales rising for the eighth quarter in a row, up by 2.1%. Online sales increased by 5.6% and now account for more than one-third of Mothercare’s UK sales. Total UK sales were up by 0.8%. Margins continued to improve as the retailer ditched its discount-heavy approach and pushed more full-price products.
Mothercare said it still expects underlying full-year profits to meet market expectations.
The company, which owns the Early Learning Centre, has been refitting some stores and closing others, as well as improving its website, as part of a turnaround effort kicked off by its chief executive, Mark Newton-Jones, two years ago.
He said: “In the UK, we have delivered our eighth consecutive quarter of positive like-for-like sales growth, with a full year of improved margins. Almost 40% of space is now in the new and much-improved format which, along with a revamped online offer, improved product and service, are being well received by our customers.”
There was no let-up on the international front, however. “In the year ahead, we expect to make further progress in the UK. However, our international markets are likely to remain challenging with the current trends in space, sales and currency continuing into the new financial year,” Newton-Jones said.
Honor Westnedge, a lead analyst at consultancy Verdict Retail, said: “Mothercare must emphasise its needs-driven and essential product offer to new parents, as demand for this product is still there but price-led rivals will be luring shoppers away. Customer service to showcase Mothercare’s specialism is essential to differentiate its proposition – a strategy that is delivering results in the UK.”
