Mothercare losses widen but co hails progress after busy year
today May 24, 2019
Mothercare reported another set of weak results on Friday but the mother-and-baby products retailer hailed its progress and said it’s “now focused on rebuilding Mothercare as a global brand.” That focus will include a bigger move into digital and more exclusive products.
Its total adjusted loss, including discontinued operations before tax and currency effects, was £11.6 million after a £2.3 million profit a year earlier. The statutory pre-tax loss was £87.3 million, wider than the previous £72.8 million loss.
The firm’s 2019 financial ‘year’ covered the 53 weeks to March 30 but comparisons are with the 52 weeks to March 24 to give greater clarity.
It managed to reduce net debt to £6.9 million from £44.1 million and said its international business is “showing signs of moderate recovery.”
But worldwide sales fell 7.9% to £1.07 billion while total group revenue was down 13.5% to £566.3 million. For its continuing operations, global sales fell 7.1% to £948 million and group revenue dropped 11.5% to £513.8 million.
And the “difficult trading conditions” in the UK continued with like-for-like sales there down 8.9% “exacerbated in the first half by reduced consumer confidence in the brand following the group's refinancing, together with wider market uncertainty.” Improvements in trade were seen in the later part of the year but total UK sales still fell 11.8% for the period as a whole and even UK online sales fell 8%.
International retail sales were down ‘only’ 0.3% in constant currency and 3.9% in actual currency.
It saw growth in the year in core international markets Russia, China and Indonesia, but “macroeconomic and trading challenges in the Middle East.”
Yet despite all the red ink, the company stayed upbeat and said that it successfully completed the UK store closure programme, following the CVA process, ahead of schedule. Its UK estate now comprises 79 stores, down from 134 in the prior year, representing a reduction in space of 30%.
It also delivered annualised cost savings greater than the targeted £19 million, announced the sale of the Early Learning Centre to the Entertainer for £11.5 million and the sale and leaseback of the Watford HQ for £14.5 million, “enabling a further reduction in bank debt and a focus on our core strategic priorities.”
Importantly too, it has completed the first season's product buy with its new sourcing partner W.E. Connor.
CEO Mark Newton-Jones said: “We have achieved a huge amount this year, refinancing, restructuring and reorganising Mothercare to ensure a sustainable future for the business. The majority of that work is now done. Whilst this major restructuring activity has resulted in significant headline losses for the year, the business is now on a sounder financial footing.
“The next phase of our strategic transformation plan is to develop Mothercare as a global brand, maximising the opportunities we see across many international markets. At the same time our primary focus in the UK will be the development of our online proposition, the introduction of enhanced credit options and more exclusivity in product, coupled with a reinforcement of our specialist and service credentials.
“In the early stages of this financial year, we are seeing some improving UK trends as we continue to rebuild to be the specialist retailer for parents and young children."
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