Mothercare said it expected to reduce its UK store estate to below 80 by next March as it reported falling online and offline sales in first-half figures. The reduction would come three months ahead of expectations, after a first half in which the retailer for parents and carers of babies and young children closed 20 stores. A further 40 stores are due to close by March.
Today the retailer, a Top50 business in IRUK Top500 research, said sales at the business had been hit by its high profile refinancing and decision to use company voluntary arrangements (CVAs) to close stores and renegotiate terms with landlords. This affected visitor numbers both to its website and to its UK stores, and UK sales fell by 14.3% in total, or 11.3% on a like-for-like basis with strips out the effect of store openings and closures. Online, sales of £81m were 7.8% down on last time. In addition to the general downward trend, online was also hit by a decision to halve the range of toys that it sells, as it focuses further towards younger children. Online accounted for 45% of sales. Within that, 42% of online sales came via in-store iPads. Most (88%) of the remaining online sales came via mobile devices.
Mothercare said its UK business was also affected by “challenges” as suppliers restricted stock availability.
Group revenue of £295m in the 28 weeks to October 6 was down by 13.1% on the same time last year, while UK sales of £196.2m were 14.3% down on last year. The retailer reported a pre-tax loss of £14.4m, narrowing by 14.3% from £16.8m at the same time last year.
Chief executive Mark Newton-Jones said: “Over this period, we have continued our relentless focus to transform Mothercare into a business that has a sustainable and relevant future for its global customer base.
“We have completed the capital restructuring of the business, the UK store closure programme is well underway and due for completion earlier than planned, we are making our sourcing operations more efficient and our cost-saving initiatives are well on schedule.”
He added: “Our international business is showing signs of recovery after a difficult few years and some core markets, including Russia, China and Indonesia, have moved into growth. The UK retail environment, however, remains very challenging and given the ongoing uncertainty with consumer confidence, alongside the short-term impacts of our operational changes and restructuring programme, we expect performance in the remainder of our financial year to remain volatile.
“Thereafter we are confident that our strategy will ultimately reinvigorate the business and restore Mothercare as a leading global specialist for parents and young children.”
Our view: It’s telling that Mothercare’s business has moved online so quickly, thanks to shoppers finding it more convenient to buy through their phone, or to order online from the store, having tried out the goods on display, rather than take often bulky items away with them. Today’s half-year results show that 45% of sales are now online, and the retailer continues to cut its store numbers to reflect the way that its shoppers now buy.
Five years ago, back in 2013, Mothercare published half-year results that showed it envisaged it would trade from a core of “200 profitable stores”. But that was when 28% of its sales were made online. Now it seems that even 100 stores would be too many for it to operate profitably in today’s competitive market, where children’s clothes and toys can now be bought as easily alongside a supermarket shop, whether that takes place online or offline, as from a store.
Image courtesy of Mothercare