Parenting retailer Mothercare has seen a bottom-line pre-tax loss of £102.9 million after a £55 million writedown on the value of the group's Early Learning Centre and nearly £10 million in the UK in restructuring costs.
After stripping out one-off costs such as the writedown on the ELC, underlying profits plunged 94% to just £1.6 million.
In the UK, Mothercare expects the consumer environment to remain difficult and reassured that it is "planning accordingly".
Simon Calver, chief executive of parenting retailer Mothercare has said he would be "ruthless" on costs after reporting £103 million loss today. Mr Calver, who came to Mothercare from internet movie rental firm Lovefilm, said:
We have a long way to go, and the plan to bring the UK business back to acceptable levels of profitability will take three years.
We need to invest in e-commerce, be ruthless with our non-store cost base and use our scale and growth worldwide to drive sourcing economies and pass these savings onto the customers to improve our value for money around the world.
The uphill challenge faced by the new boss of Mothercare was underlined today as a dismal UK performance dragged the parenting retailer to a £103 million loss.
The group saw like-for-like sales tumble 6.2% in the year to March 31 in the UK, where it plans to cut store numbers from 311 to 200 by 2015 in a bid to save £13 million a year.
Presenting his first set of results, Simon Calver, who joined at the end of April, said he would be "ruthless" on costs as he rolls out a three-year turnaround plan.
Mothercare's shares may have fallen 60% in the last year, however, they were up today by 4% after their announcement on shop closures. The shares are now trading up over 10% at 188p. City likes Mothercare's restructuring news, but will customers?
After the closures, Mothercare will have 200 stores - 95 out of town and 105 on the UK high street. The company aims to grow with 1000 stores created abroad. The retailer have not yet announced which stores will close in the UK.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers has said that Mothercare is 'fighting back' after shares fell by 60% in the last 12 months. Mr Bowman said:
"While the road ahead still looks difficult, Mothercare's fightback looks to have begun, with consensus opinion potentially thawing from an out and out sell."
David Jeary, an analyst at Investec, said the changes were "all in all, sensible and needed", but further detail was required from the full-year results later in the year.
Mothercare has pledged to accelerate its international expansion, as part of their transformation strategy. Sales have been propped up by a strong performance overseas, where it has 1,000 stores, with international sales growing 18% in the fourth quarter, despite the closure of 11 stores.
The update comes weeks before Simon Calver, the former boss of internet movie rental company Lovefilm, becomes chief executive in an appointment that has signalled the parenting group's drive to boost its online presence.
The group has said it will launch combined online and in-store customer options with its new UK website, which is on track for launch in the first half of the next financial year, as well as 30 new overseas websites.
Struggling retailer Mothercare has said that following the closure of 11 stores, there would be further reductions over the next three years:
- 111 UK stores to close over next three years, with 730 jobs being cut.
- This means the number of stores in the UK will fall from 311 to 200.
- 36 Mothercare sites and 75 Early Learning Centres will close.
- UK like-for-like sales fell 9.5% in the 12 weeks to March 31, compared with 3% in the previous quarter.
The Executive Chairman of Mothercare has said the closing of 111 stores would help "restore the UK business back to profit". Alan Parker said that having a smaller 'UK portfolio' would help to operate a "lean, more competitive business". Mr Parker said:
"Since November, a significant amount of progress has been made across the business. We launched a structural and operational review, appointed a new CEO, closed a significant number of underperforming stores and commenced a consultation programme to streamline our head office function.
Today we have announced the framework of our decisive three year strategy to restore the UK business back to profit and strengthen our foundations for growth. This will see us operate a lean, more competitive business, focused on the existing profitable stores in a smaller UK portfolio, combined with a state of the art online platform."
The retailer Mothercare has said it will close a further 111 stores over the next three years.