UK’s Mothercare scales back in bid to stay afloat

Struggling British baby products retailer Mothercare said it would trade from fewer than 80 UK stores by April next year as it shrinks its portfolio as part of a plan to stay in business.

Shares in the retailer, which traded from nearly 400 UK stores a decade ago, fell as much as 9.4 per cent on Thursday after it reported a wider first-half loss and warned trading would remain volatile. The stock has lost more than three-quarters of its value over the past year.

The first-half loss reflected an 11.1 per cent slump in underlying sales in Mothercare’s home market, which it blamed on wider market uncertainty and “negative press coverage” of its financial restructuring.

The group’s sales and profit have been hammered by intense competition from supermarket groups and online retailers in its main British market as well as by rising costs. Mothercare’s UK business has not made a profit for over a decade.

In July it detailed a survival plan to refinance, close more than a third of its UK stores and slash costs.

It said 20 stores had closed so far and about 40 more would shut by April, reducing its estate to fewer than 80. The remaining estate will include 32 stores with leases which expire within three years.

Chief Executive Mark Newton-Jones said he was targeting the UK business to be at least at break-even within two years.

“If that means exercising some more lease expiries as they come up to take the rental burden down, then we’ll do so,” he told Reuters.

Mr Newton-Jones said that while the UK remains “very challenging”, Mothercare’s international business, which generates two thirds of group turnover, was showing signs of recovery, with growth in Russia, China and Indonesia.

And he was confident his strategy would ultimately reinvigorate Mothercare as it remained “the go-to mum and baby business”, with market-leading shares in key product categories, such as prams, push chairs and baby clothes.

Mothercare made an adjusted pretax loss of £6.2 million (Dh29.3m) in the 28 weeks to October 6, versus a loss of £2.6m a year earlier.

The CEO said it was on track to meet analysts’ average forecast of a pretax loss of about £14.6m for the full 2018-19 year.