Mothercare hope for trading revival

Retailer Mothercare today offered hope that a long-awaited trading revival could be underway after seeing autumn sales begin to spark.

The group encouraged investors after months of gloomy news to report that the slowdown in like-for-like sales had eased in the 14 weeks to Saturday.

The sales fall of 1.2% stores compares with a decline of 3.1% in the 14 weeks to July 12 as Mothercare attempts to pull out of its sales nosedive.

In July, chief executive Chris Martin quit after Mothercare warned it would slide into the red for the first half of its financial year.

Fortunes remained tough at the start of the autumn trading season because of the warm weather in September but have since shown signs of improvement.

Finance director Mark McMenemy said: “The first half has been disappointing in both sales and profit. However, as expected we are now seeing positive sales in each division as we enter the second half.”

Shares in Mothercare, which have fallen from a peak of 264p earlier this year, gained almost 5% to 96.5p today.

Mr McMenemy is currently acting chief executive following the departure of Mr Martin who took the helm in May 2000 when Mothercare was split from Bhs by parent company Storehouse.

The retailer had been on the rise until problems at a distribution warehouse hit stock availability in the run up to the crucial Christmas trading period last year.

The company has since appointed Ben Gordon, managing director of the Disney Store in Europe and Asia Pacific, to take over as chief executive in December.

It is due to issue interim results on November 21 but warned today that the need to clear summer lines had resulted in lower margins, although still in line with the company’s own forecasts.

Costs have also failed to come down as much as expected at Mothercare’s distribution centres because the company’s primary focus has been on ensuring service requirements of the business are met.

Today’s trading statement added: “Mothercare continues to work to reduce these costs as a matter of urgency, whilst protecting service levels.”

In the international business, which is a lower margin business, sales rose almost 29% in the 28 weeks to October 12 and helped overall group sales for the period to improve by 0.7%.