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Online growth set to lead Mothercare towards profitability as an omnichannel retailer

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More than a quarter of Mothercare’s UK sales are now made online, with 33% of all online visits now from a mobile device. In its half-year results, the nursery retailer said its transformation programme was seeing results as online sales continue to grow and its losses narrowed.

Online orders placed at home, Direct in Home sales, grew by 11.6% to £48m in the first half of its financial year, while sales of goods ordered online in the store, its Direct in Store business, grew by 4.1% to £18.7m during the period. Some 36% of all Direct in Home sales were collected from stores using the free next-day click and collect service introduced at both Mothercare and the Early Learning Centre during the first half.

“This is important,” said chief executive Simon Calver in his half-yearly report, “because online customers spend twice as much as our store-only customers and multichannel customers spend twice as much again.”

Other innovations included the introduction of eReceipts, delivering electronic customer receipts that enable retailers to track customer behaviour.

But while sales increased overseas and online, at home, the company reported a fall in overall UK sales. Mothercare is working to develop an omnichannel business as it looks to return to profitability in the UK – the company turned in losses of £14.9m in the first half of its financial year.

Across the business, Mothercare unveiled UK sales of £238.4m in the 28 weeks to October 12, down by 7.5% compared to the same time last year, while retail sales fell by 7.4% to £222.2m. International sales, however, were 5.4% up, at £137.9m, which left overall group sales 3.1% down at £376.3m. Pre-tax losses narrowed to £11m from £28.6m last time. Underlying profits, however, moved into the black at £2m, compared to a loss of £1.8m last time.

Calver said: “The benefits of the changes we are making to the business are clear, with a return to underlying profit. Our international business continues to deliver double-digit growth and the opportunities in these markets remain.

“In the UK, online sales are growing and customer surveys indicate improving satisfaction rates. The newly-launched CRM capability will help us improve service levels further as we align our offer to our customers’ needs. We continue to target a return to profit in the UK and the reduced UK operating loss this half-year is a step in the right direction.”

Calver said the company was planning “for consumer spending to remain subdued in the UK during the second half of the year.” He added: “We have made progress with our transformation and growth plan but there is more to do.”

The company is also continuing to close UK stores as it looks to focus on an estate of 200 profitable outlets. The company now has 53 stores in China, following 15 openings during the period. Mothercare also aims to launch 30 overseas new overseas websites.

Our view: The losses may still remain heavy, but we think Mothercare is right to focus on the way it serves its customers. To deliver an omnichannel approach in practice can be as simple as giving customers the kind of service they want. What benefits the customer, after all, will soon benefit the retailer, as Simon Calver made clear when he pointed out that multichannel customers spend four times as much as store-only customers. The signs are that Mothercare is succeeding in its mission.

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