• Total loss before taxation widened to GBP21.2m (US$27.9m) from GBP18.5m a year ago. 
  • Group revenue tumbled 13.2% to GBP234.1m.
  • Total UK sales dropped by 19.2% to GBP131.8m.
Mothercare appointed PricewaterhouseCoopers as administrators to the Mothercare UK business and the Mothercare business services company in November

Mothercare appointed PricewaterhouseCoopers as administrators to the Mothercare UK business and the Mothercare business services company in November

Mothercare has widened its losses for the first half of the year amid a drop in total revenue and falling international and domestic sales, just weeks after appointing administrators for its UK business and announcing the closure of all 79 UK stores.

For the 28 weeks to 12 October, the mother and baby products retailer reported a total loss before tax of GBP21.2m (US$27.9m), compared to a loss of GBP18.5m in the prior year. Adjusted loss before taxation was GBP5.8m, compared to GBP10.5m last time.

Total group revenue, on a continuing operations basis, declined 13.2% to GBP234.1m from GBP269.8m, while worldwide sales were down 8.4% to GBP452.3m. 

International retail sales were down 5.3% in constant currency and by 1.6% in actual currency to GBP316.4m. Mothercare noted growth in its core markets of India, Indonesia and Russia, but said macroeconomic and trading challenges continued in the Middle East.

Meanwhile, the group's domestic business continued to be plagued by difficult trading conditions, with total UK sales tumbling 19.2% in the 28 weeks to GBP131.8m. Domestic like-for-like sales were down 2%, reflecting challenges for both stores and online trading.

Last month Mothercare appointed PricewaterhouseCoopers as administrators to the Mothercare UK business and the Mothercare business services company. It also announced the closure of all 79 of its UK stores with the potential loss of around 2,800 jobs as it shifts its focus to its international business.

In today's trading update, CEO Mark Newton-Jones said: "It was simply not financially viable to maintain the UK store estate and supporting infrastructure any longer without putting the whole Mothercare Group at risk. Whilst this was a very difficult decision and one we didn't take lightly, it completes the transformation of our group into a capital light, cash generative and profitable business and, importantly, protects all of the pensioners of the group." 

He adds "as stark a reality as it is," the UK retail division of the group has not made an annual operating profit in over ten years, with all of the group's profits generated from its international franchise business. 

"Without the financial and management burden of running a UK retail operation, the group can singularly focus Mothercare on its global international franchise," he says.

The company noted today's update (10 December) that it is still engaged in discussions with regards to establishing a franchise of Mothercare in the UK. Talk of an independent Mothercare UK franchise first began in July.

What the analysts say

Steve Miley, a senior market analyst at www.asktraders.com, notes the bad news just keeps on coming for Mothercare with the latest first-half results highlighting the problems at the retailer after it called in the administrators.

"There was nothing to celebrate in the report with domestic and international sales slumping, a loss before tax of GBP21.2m and net debt rising an eye-watering 14.4%," Miley says.

"These numbers demonstrate Mothercare's downfall as the once-popular babywear retailer failed to adapt to the increasingly digital marketplace. Cold winds are blowing down the UK high street, if a retailer under-invests in its online offering clouds will quickly gather on the horizon. Mothercare forms part of a growing list of retailers that have stumbled or collapsed this year. Whilst the potential for easing Brexit uncertainty next year could help boost consumer confidence, changes to shopping habits are here to stay."

Meanwhile, Greg Lawless, analyst at Shore Capital, says the firm has placed its recommendation on Mothercare stock 'Under Review' and needs to model the new operating structure of the group and re-issue forecasts incorporating anticipated UK franchise arrangements.

"Whilst we have warmer rather than cooler feelings towards Mothercare's shares now and call out an exceptional period of work by chairman, Clive Whiley, and CFO Glyn Hughes, until we understand and can model what could be a profitable, cash generative and highly solvent business, we need to be a little judicious for now," Lawless adds. 

Expert analysis

Mothercare plc (MTC) - Financial and Strategic SWOT Analysis Review

Mothercare plc (MTC) - Financial and Strategic SWOT Analysis Review

Mothercare plc (Mothercare) owns and operates multi-channel retail stores. It operates as a franchiser, retailer and wholesaler of various products for mothers-to-be, babies and children. Its product ...read more