Mothercare warns on profits after sales slump

Both in-store and online sales fell in the run up to Christmas. Credit: PA

Mothercare saw sales plummet in the run up to Christmas, causing the retailer to issue a profit warning.

Like-for-like sales at the baby retailer fell 7.2% in store, while online sales tumbled 6.9% in the 12 weeks to December 30.

Due to the fall in sales, Mothercare now expects adjusted group profit for the year is likely to be in the range of £1 million to £5 million.

Analysts had previously forecast profits would be around £10 million.

The announcement comes as Mothercare attempts to reduce the number of shops it has in the UK from 143 to between 80 and 100, having already closed down in several locations over the past nine months.

"As we signalled in November, there has been a softening in the UK market with lower footfall and website traffic resulting in lower spend in both stores and online," Chief Executive Mark Newton-Jones explained.

"This trend has continued.

"Going forward, we are not anticipating any improvement in the short-term market conditions for the UK."

The Chief Executive of Mothercare said the company does not 'anticipate any improvement in the short-term market conditions'. Credit: PA

Soaring inflation, which hit 3.1% following the Brexit vote, is thought to be one of the reasons for the fall in sales due to a weakened consumer confidence.

Total UK sales also fell 11% over the period, reflecting a store closure programme linked to a turnaround plan. In the year to date, sales are down 4.5% in the UK.

Mothercare added that another reason why its profits had taken a hot was because it attempted to remain at full price to protect its "brand positioning" ahead of Christmas, but then began discounting heavily, which has eroded profit margins.

"In our UK business, we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end of season sale," Mr Newton-Jones said.

"We have subsequently seen good progress with strong sell through rates on Autumn Winter clearance lines albeit these carry lower margins and will lead to a further reduction in full-year margin as a result," he added.

Group sales fell 2.4% as the firm described international trade as "challenging".

It is the second warning over consumer confidence in quick succession from Mothercare, which at its half-year results in November said that the UK retail market is "softening".

Mr Newton-Jones continued that "whilst the performance of the business has been challenging in the last few months, we remain singularly focused on transforming Mothercare to be the leading global retailer for parents and young children."