26th Jul 2019 11:08
(Alliance News) - Mothercare PLC on Friday warned margin improvements are going to take longer than expected due to continued "fragile" consumer confidence.
Shares were down 10% on Friday morning in London at 17.75 pence each. In July 2015, they reached 148.48p.
Mothercare in the summer of 2018 undertook a GBP117.5 million refinancing and group restructuring, and has also since disposed of its Early Learning Centre business after weak trading put the company under pressure.
Progress is being made, Mothercare said, but the UK market "will continue to be uncertain and volatile, accompanied by fragile consumer confidence".
"Against this backdrop and the need for continued promotional activity, gross margin improvements in the UK are expected to take longer to materialise than previously anticipated," said the company.
"Accordingly, underlying full-year profit before tax is forecast to be broadly comparable to the prior year, inclusive of an estimated negative impact of GBP2 million of adopting IFRS16."
In the 53 weeks to March 30, Mothercare posted an underlying pretax loss of GBP8.6 million.
On the operational front, sales rose the 15 weeks to July 13 fell 9.2% year-on-year, with UK sales falling 23%, and 3.2% like-for-like. The sales drop comes due to "extensive" store closures.
Internationally, sales at actual currency rates fell 2.1%, and at constant rates declined 4.5%.
"The UK retail market remains challenging and though the rate of decline in like-for-like sales has moderated, margin investment in promotional activity has been necessary to stimulate sales, both in our stores and online," said Chief Executive Mark Newton-Jones.
"The impact of this has negated much of the margin benefits we had expected to materialise. Furthermore, we have observed a lower than expected transfer of sales following the CVA store closure programme which completed in early April 2019."
"International performance has been mixed with good progress in our growth markets of Russia, India and Indonesia offset by macro and micro challenges in the key markets across the Middle East," he continued.
"We have recently presented the newly designed global product range and the global brand marketing campaign to our franchise partners, both of which have received a positive response."
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