Mothercare Moves Back Into Profit For The First Time In Five Years

Mothercare reported its first full year profit in five years today, benefiting from lower costs and improved trading in its core UK business.

For the year to 26 March 2016, the retailer posted a statutory profit before tax of £9.7m compared to a loss of £13.1m in the previous years, on group sales down 4.4% to £682.3m. Its UK division still made a loss of £6.4m. although this was improvement on last year’s £18.0m and comes after a pick in trading in its stores and online.

The group has been closing underperforming stores whilst modernising and refurbishing others. It refurbished 47 stores last year with 40% of retail space in the UK now in a “new, modern and much improved format.” This helped lift UK like-for-like sales by 3.6% with total sales edging up 0.3% to £459.7m, despite 19 store closures.

Renewed focus on its online actives also help lift sales on this side of its business by 15% with it now accounting for 37% of UK retail sales.

Meanwhile, difficult trading conditions overseas led to international like-for-like sales falling 4.5%.

Mark Newton-Jones, Chief Executive of Mothercare, said: “The results highlight the significant progress we are making towards returning the UK to profitability. Improvements to our customer offer, both in store and online, and the look and feel of the store estate are driving like-for-like sales growth for a second consecutive year. Nearly 40% of the store estate is now in the new and much improved format and the feedback from customers continues to be positive. This sales growth is not at the expense of gross margins which have also returned to growth. There is still much to do, but we are encouraged by our maintained trajectory towards profitability in the UK.”

He added: “Conditions for our International business remain challenging. The issues are primarily at a macro level, with economic and currency headwinds persisting. Whilst we recognise these pressures, we believe that we can also make some improvements in how we operate. We are exiting underperforming stores whilst continuing to grow space where there is potential for long term growth. We are also taking the lessons learned from our success in the UK and exporting them to our International markets. This is strengthening our International operations and improving the management of our brand globally.”