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Mothercare returns to profit two years into digital-first transformation

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Mothercare this week reported a move back into the black as its digital-first transformation plan reaps dividends.

The retailer for parents and young children reported pre-tax profits of £9.7m in the year to March 26, up from a loss in the previous four years. Underlying pre-tax profits came in at £19.6m, 51% up on the previous year on sales that were 3.6% up on a like-for-like basis, which strips out the effect of store openings and closures. Online sales grew by 15% to account for 37% of UK retail sales. The number of orders placed in the store via iPads grew by 25% and now accounts for 41% of all online sales. Mobile commerce grew fast and by year-end accounted for 58% of the online sales that were from home or outside the store network. About a third of all online orders were picked up via click and collect.

Mothercare invested in its store network during the year, with 56 UK stores – adding up to almost 40% of UK space – now refurbished. A further 19 were closed during the year with two new stores opened in the UK and a net 37 new stores overseas – the retailer now trades in 57 countries.

“I’m pleased to report that two years into our turnaround strategy we have recorded a 51% growth in underlying profit before tax and the delivery of our first statutory profit in five years,” said chief executive Mark Newton-Jones.

“The results highlight the significant progress we are making towards returning the UK to profitability. Improvements to our customer offer, both in store and online, and the look and feel of the store estate are driving like-for-like sales growth for a second consecutive year. Nearly 40% of the store estate is now in the new and much improved format and the feedback from customers continues to be positive. This sales growth is not at the expense of gross margins which have also returned to growth. There is still much to do, but we are encouraged by our maintained trajectory towards profitability in the UK.”

He said conditions for international sales remained “challenging” thanks to “economic and currency headwinds”.

He added: “Whilst we recognise these pressures, we believe that we can also make some improvements in how we operate. We are exiting underperforming stores whilst continuing to grow space where there is potential for long term growth. We are also taking the lessons learned from our success in the UK and exporting them to our international markets. This is strengthening our International operations and improving the management of our brand globally.”

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