Mothercare’s Christmas shopping nightmare
Mothercare has seen £29m wiped off its value after revealing that online sales plunged over the christmas period.
Shares at the mother-and-baby retailer sank nearly 28pc after it issued a market update in which it admitted fewer were visiting its stores and website and shoppers were spending less money.
even its international business, which had boosted the firm in the past, saw sales fall.
the dismal results have forced Mothercare to downgrade its profit guidance, slashing expectations by more than half to between £1m and £5m. analysts had predicted it could make £12m.
Its results sent jitters across the high Street ahead of a week of results for the major retailers.
and it comes as fears grow about the health of rivals house of Fraser, New Look and Debenhams.
Mothercare chief executive Mark Newton- Jones said: ‘Going forward, we are not anticipating any improvement in the short-term market conditions for the UK and on this basis the adjusted group profit for the year is likely to be in the range of £1m to £5m.
‘Whilst the performance of the business has been challenging in the last few months, we remain singularly focused on transforming Mothercare to be the leading global retailer for parents and young children.’
Sales at Mothercare’s UK business dived 11pc in the 12 weeks to December 30 as shop sales dropped by 7.2pc and purchases made via its website fell 6.9pc. online sales make up 42pc of Mothercare’s business, compared to just 16pc in 2012.
It has 143 stores in the UK, four of which are early Learning centres, although it is in the process of cutting the number of stores to between 80 and 100.
Its overseas business did little to prop up the group as international sales dropped by 6.8pc, despite improving conditions in some of its markets. Mothercare operates 1,131 stores in countries including Singapore, Malaysia, Kuwait and russia.
Last night retail experts were warning that the way shoppers buy goods had fundamentally shifted in the past year – with footfall on the high Street down 10pc year-on-year in December, according to pollsters Ipsos.
and figures from the British retail consortium said that while sales of food had climbed over christmas, non-food had fallen. Yesterday, Debenhams had its rating slashed by Moody’s as the credit agency raised concerns about the volatile trading environment. Unlike rivals, Mothercare chose to keep items in stores at full price ahead of christmas but then resorted to slashing prices after the festive period. Laith Khalaf, an analyst at hargreaves Lansdown, said the strategy had backfired for the store. he said: ‘We have already seen some evidence that consumers went bargain- hunting over christmas, which isn’t surprising against a backdrop of stagnant wages and rising inflation.
‘It will be interesting to observe how this plays out for those retailers who have limited their promotional activity,’ he said.
‘ certainly this approach doesn’t look to have paid off for Mothercare in the run up to christmas, but on the other hand, Debenhams had to downgrade its profit forecasts after cutting prices to lure shoppers into parting with their cash.’
Mothercare shares were down 27.5pc, or 17.05p, to 44.95p.