Mothercare Shares Fall 21% As World Sales Ease

Mothercare (Other OTC: MHCRF - news) has blamed low oil prices in the Middle East and weak consumer confidence in China for a 6.7% fall in sales in a quarterly trading statement that sparked a 21% fall in its share price on Thursday.

The retailer of goods for parents and young children said its turnaround plan had helped deliver an eighth-consecutive quarter of like-for-like sales growth in its core UK market - up 2.1% in the 11 weeks to 26 March.

It (Other OTC: ITGL - news) added that margins had remained strong thanks to its refusal to discount.

Mothercare, which has been closing unprofitable UK stores including shops in its Early Learning Centre brand, said 40% of the 170 stores remaining had now been refitted and sales growth was also being supported by its online operation.

However its international business - once credited with driving sales as the UK operation struggled - was still proving a drag on overall sales, the company confirmed.

International sales by constant currency fell 10.8% over the final three months of its financial year.

Its trading statement said: "In the Middle East consumer sentiment was impacted by the sustained lower oil price, resulting in a significant decline in constant currency sales.

"In Asia, China in particular, was affected by weakening consumer confidence. Europe and Latin America were impacted by adverse currency moves."

Chief executive Mark Newton-Jones added: "In the year ahead, we expect to make further progress in the UK. However, our international markets are likely to remain challenging with the current trends in space, sales and currency continuing into the new financial year."

Shares (Berlin: DI6.BE - news) plunged just below 150p, meaning they are now nearly 30% lower since the start of the year and have lost nearly half their value since last July when they reached 295p.

Honor Westnedge, lead analyst at Verdict Retail, said: "We expect Mothercare to continue this momentum into 2016/17 and fewer store closures should ensure stronger total growth in its domestic market - helping to offset ongoing international challenges.

"It must continue to improve its online platform, with features such as augmented reality or video tutorials important to stimulate traffic and purchases (Other OTC: UBGXF - news) ."