More retail pain.
Mothercare, the baby and maternity products specialist, has been struggling in the UK for a while but its overseas businesses have been more successful and have taken up some of the slack.
But there is bad news for its international aspirations after its minority owned Australian business went into administration. Poor trading in Australia had led to a decision to sell the Mothercare and Early Learning Centres there to the Myer family, but this deal has now fallen through. So, administration.
Mothercare said it had made a £10.6m provision to cover the remaining value of the Australian business, which accounted for around 7% of its international sales. It said the move did not affect its view of the overseas division's future profitability, but its shares have fallen 3.75p to 325.25p on the news.
Sanjay Vidyarthi at Espirito Santo said:
We suspect that the issue [in the disposal talks] has been continued tough trading in Australia. Mothercare had provided for the investment at the interims and was working on two week payment terms, so there should be limited additional impact in profit and loss or cash terms.
The joint venture was loss-making and the elimination of these losses (through sale of the business or otherwise) was already in guidance. We maintain our sell recommendation on Mothercare.
