For the year ended 24 March, net loss totalled GBP72.8m (US$98.2m)

For the year ended 24 March, net loss totalled GBP72.8m (US$98.2m)

Ailing UK-based mother, baby and children's goods retailer Mothercare has posted what one analyst has called a "disastrous" set of full-year results, adding it is "no wonder" the company has had to resort to a drastic restructuring plan.

For the year ended 24 March, net loss totalled GBP72.8m (US$98.2m), compared to a profit of GBP7.1m last year. Mothercare attributed the "significant" loss to restructuring, closure costs, store asset impairments and onerous leases. Group adjusted profit before tax of GBP2.3m was in line with guidance given in January, while the business finished the year with a gross margin reduction of 216 basis points.

Total group sales, meanwhile, were down 1.9% to GBP654.5m from GBP667.4m. In Mothercare's domestic market, revenues fell 4.8% to GBP437.6m, partly reflecting the firm's store closure programme, while UK like-for-like sales were down 1.3%. Adjusted UK losses increased by 353.1% to GBP19.8m.

Mothercare said the trading environment in the UK deteriorated over the course of the year, and particularly from the end of September onwards, due to a significant slowing of consumer footfall to stores in light of wider pressures on customer spending and increasing competition.

International markets also remained challenging, but the group saw an improved performance in the second half and a moderate return to growth in the Middle East, which it deemed encouraging. International sales were down 5.8% overall in constant currency, and 5% in actual currency, reflecting difficult trading environments and lower market footfall in Russia.

Online sales were up 1.2% and now account for 43% of UK retail sales, compared to 37% this time last year. Mobile meanwhile, represents 69% of online traffic.

The results come just a day after Mothercare announced plans to close 50 stores and bring back former CEO Mark Newton-Jones under a new rescue plan aimed at securing its financial footing.

Around 800 jobs could be at risk with the closures, which form part of a company voluntary arrangement – a form of insolvency – the retailer is undertaking, through which it will seek cost savings of at least GBP10m (US$13.5m) per annum from rent reductions and store closures.

The refinancing is expected to provide Mothercare with funding of up to GBP113.5m to support the business.

Looking ahead, the retailer said its initial priority is to restructure and refinance the business to provide it with a solid platform from which to continue its transformation. It added there is also a need to focus on stabilising the UK business and putting trading on a firmer footing, and to ensure the Mothercare proposition is relevant for the consumer.

Zoe Mills, retail analyst at GlobalData, notes the restructure comes as no surprise given Mothercare's "disastrous" full-year results.

She added despite Mothercare taking action to lessen the effect of its poor performing stores, it must not neglect its online proposition, noting the softening of online sales growth to +1.2% in FY2017/18 from 7.8% in the prior year – a "dire result given the buoyancy of this channel".

"It highlights that there is still further investment needed to ensure Mothercare captures the potential of this channel as consumer spend continues to transfer online," she says. "With 43% of its UK sales made online, the retailer is also facing greater competition from growing online pureplays such as Amazon. Greater focus must be placed on its customer-facing online formats, including optimising apps, and mobile and tablet sites, to continue to drive sales online rather than focus on sales through iPads in its stores."

Meanwhile, Mills says the surprising announcement that Newton-Jones is to return to the firm having been removed from his CEO position just five weeks ago, can only point to "rash decisions" having been made in the wake of its worst-performing quarter of FY2017/18.

"Newton-Jones will need to reassure both investors and staff that stability will follow to ensure any chance of future survival," she says.