Yahoo Finance Mothercare profits warning after dire Christmas sees sales slump
Mothercare has issued a profits warning after a dire Christmas trading period.
It saw sales slump both in-store and online as it became the second big name retailer after Debenhams to post a set of poor results.
The mother and baby retailer is the first of about 20 businesses to reveal Christmas sales figures this week, which will include the likes of Tesco and Marks & Spencer.
MORE: ‘Volatile’ Christmas sales sees Debenhams issue profits warning
Mothercare said UK like-for-like sales plummeted 7.2% in the 12 weeks to December 30, while online sales tumbled 6.9%.
As a result, Mothercare now expects adjusted group profit for the year is likely to be in the range of £1 million to £5 million.
Chief executive Mark Newton-Jones said: “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.
“Going forward, we are not anticipating any improvement in the short-term market conditions for the UK.”
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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.
Newton-Jones added that Mothercare attempted to remain at full price to protect its “brand positioning” ahead of Christmas, but then began discounting heavily, which has eroded profit margins.
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 at its half-year results in November said that the UK retail market is “softening”.
The company is working to slim down the total number of UK stores to between 80 and 100 from 143, having shuttered several locations over the past nine months as part of those plans.
MORE: Tesco takes the Christmas crown in festive retail wars
The chief executive added: “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.”
Neil Wilson, senior market analyst at ETX Capital, told the BBC that the decision not to cut prices was a mistake.
“Admirable, perhaps, but with competitors slashing prices ahead of Christmas amid (justified) fears of a slowdown in consumer spending, it looks as if the ‘conscious decision’ to remain at full price prior to Christmas but to then discount more heavily in the end of season sale was a mistake,” he said.
Debenhams said last week it was considering closing more stores as it revealed like-for-like UK sales fell 2.6% in the 17 weeks to 30 December amid a “volatile and competitive” market.
