21st Nov 2013 09:41
LONDON (Alliance News) - Mother and baby retailer Mothercare PLC Thursday reported a narrowed loss for the first half of the financial year as it cut costs and last year's disposal costs weren't repeated, but it continued to struggle in the UK with sales down a further 7.5%.
The retailer has been hit hard by the economic downturn, but also stiffening competition in its sector, particularly as its online offering has lagged that of some rivals. It has reacted by closing unprofitable UK stores, improving its online operation, restructuring business processes, trying to improve its product range and customer service, and better leverage its Mothercare and Early Learning Centre operations by cross-selling ELS products in Mothercare stores.
It reported a pretax loss of GBP11 million in the 28 weeks to October 12, narrower than the GBP28.6 million loss it had posted a year earlier when it was hit by GBP22.4 million in restructuring costs and losses on property disposals. Stripping out exceptional items, it actually swung to a profit of GBP2 million compared with a loss of GBP1.8 million a year earlier, thanks to cost cutting.
However, revenues fell to GBP376.3 million, from GBP388.4 million, as UK sales dropped 7.5% or 1.4% on a like-for-like basis. It continued to perform better abroad, with international sales up 14%, or 4.8% on a like-for-like basis. Excluding exceptional items, profits at the international operations rose 13.5% to GBP25.2 million.
"The benefits of the changes we are making to the business are clear, with a return to underlying profit. Our International business continues to deliver double-digit growth and the opportunities in these markets remain," Chief Executive Simon Calver said in a statement.
"In the UK, online sales are growing and customer surveys indicate improving satisfaction rates. The newly launched CRM capability will help us improve service levels further as we align our offer to our customers' needs. We continue to target a return to profit in the UK and the reduced UK operating loss this half year is a step in the right direction," he added.
Still, Calver admitted the company has more work to do in the UK, and said it was preparing for continued subdued consumer spending in the second half of its financial year.
It has closed another 18 UK stores in the first half, comprising five Mothercare shops and 13 Early Learning Centres. That means it has cut the number of stores by 74 over the past 18 months and is now trading from 237 stores.
Its international business continues to grow. Its franchise partners now have 1,156 stores in 59 countries, with Europe its biggest region with 475 stores in 27 countries.
Mothercare is not currently paying a dividend while it tries to improve its results.
Its shares were down 0.8% at 411 pence Thursday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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