Mothercare had some interesting things to say about the way its customers are buying across sales channels in a first quarter update out this week. Here are our top-level findings.
1. Online sales are still growing, even as total sales fall
UK online sales grew by 6.4% in the first quarter of the year, compared to the same time last year. But that’s not fully compensating for closed stores: total sales were down by 2.1% in the 15 weeks to July 9, while floor space fell by 4.8%. Ecommerce now accounts for 35.5% of total UK sales – which is up from 32.7% in its latest full year. Chief executive Mark Newton-Jones said the retailer had “continued to improve our customers’ shopping experience both instore and online”.
2. Mobile is driving online growth
Mobile is fast becoming the main online channel for Mothercare. Some 84% of online traffic to the Mothercare site comes via mobile, while the channel also accounts for 61% of online sales.
3. Mothercare is likely to benefit from a weak pound, in the wake of the referendum
In its international business, Mothercare saw sales up by 3.9% during the quarter, on a constant currency basis. But calculated in the light of actual exchange rates, overseas sales were up by 5.1%, which was especially noted in the Middle East and Asia.
However, Newton-Jones said: “We have not seen any immediate consumer reaction to the Brexit vote, but it is too early to call as we went into the end-of-season sale early. We hedge both dollar purchases and royalty receipts and we expect limited impact on our financial results this year.”
Background
Mothercare, an Elite retailer in IRUK Top500 research, has been working to turn around the business, rebuilding it around digital, since 2012. Its first three-year turnaround programme was launched in 2012, ahead of the arrival of then-incoming chief executive Simon Calver, at a time when online and offline sales were falling, but international sales were growing strongly.
In 2014 Calver was replaced by Mark Newton-Jones, previously of Shop Direct and Next, who that year unveiled a plan to raise £100m from shareholders for a new transformation plan to become a digital-first retailer. Full-year results unveiled earlier this year showed the company back in profit for the first time in five years, thanks to a strategy that has seen sales move online rapidly, with mobile standing out.
