Mothercare shares slump on warning

Mothercare shares slumped yesterday as the baby retailer warned over profits after a festive sales plunge, with consumer spending falling in stores and online.

In an unscheduled trading update, the group said UK like-for-like sales fell 7.2% in the 12 weeks to December 30 and online sales tumbled 6.9%.

As a result, Mothercare now expects adjusted group profit for the year to be in the range of £1 million to £5m, down from previous estimates of around £10m.

Shares dived following the news, crashing more than 27%.

“As we signalled in November there has been a softening in the UK market, with lower footfall and website traffic resulting in lower spend in both stores and online.

“This trend has continued,” CEO Mark Newton-Jones said.

“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK.”

Retailers have been hammered by weak consumer confidence off the back of soaring inflation, which has hit 3.1% following the collapse in the pound after the Brexit vote.

Total UK sales also fell 11% over the period, reflecting a store closure programme linked to a turnaround plan.

In the year to date, sales are down 4.5% in the UK.

Mr Newton-Jones said Mothercare had attempted to remain at full price in the festive run-up.

“In our UK business we took a conscious decision to remain at full price to protect our brand positioning prior to Christmas but to then discount more heavily in the end-of-season sale,” he said.

“We have subsequently seen good progress with strong sell-through rates on autumn winter clearance lines, albeit these carry lower margins and will lead to a further reduction in full-year margin as a result,” he said.

Group sales fell 2.4% as the firm described international trade as “challenging.”

It is the second warning over consumer confidence in quick succession from Mothercare, which said at its halfyear results in November that the UK retail market is “softening”.

The firm is working to slim down the total number of UK stores to between 80 and 100 from 143.

Shares in Mothercare closed the session down 27.5% or 17.05p at 44.95p.

Picture: PA. Shares in Mothercare were hit hard by a profit warning.