Mothercare forecasts return to profit in FY 2021

Mothercare expects to return to the black this year despite a hefty slide in annual sales, the parent and child specialist confirmed on Tuesday.

Updating on full-year trading, the group said net worldwide sales had fallen 40% in the 12 months to 27 March, to £326m.

Mothercare said: “As a global brand, the impact of Covid-19 has varied enormously by market as the countries in which our franchise partners operate have addressed the pandemic in different ways, including restrictions on travel, movement and operating hours.”

Disruption to the global movement of freight further impacted sales.

However, it added that despite that, it now expected to report a "small" earnings before interest, tax, depreciation and amortisation profit for the year, against a previously forecast for a small loss. Net debt was also reduced during the year, to £12.1m.

After a difficult few years, Mothercare went into administration in 2019, and closed all its 79 UK stores in early 2020. Since then it has restructured to become a franchise-only business, and secured a partnership deal with healthcare retailer Boots in the UK. Its 800-plus overseas stores, which were unaffected by the UK administration, have always operated as franchises.

Clive Whiley, chairman, said: "Our performance in 2021 shows that while we are not immune to the impact of the pandemic on our franchise partners’ operations around the world, we have ended the year in a far stronger position that we started it.

"Our resilient performance and financial position bears out the robustness of the Mothercare business today, delivering what will be a positive if modest EBITDA result for the year.

"We enter the 2022 full year as a conservatively-financed, cash-generative and profitable business."

Mothercare said over 80% of its franchise partners were now open, which pointed to a recovery in group revenues.

It continued: "Taking into account these reducing impacts upon us and our franchise partners’, the implementation of the new operating model, greatly reduced cost structures, and the elimination of significant legacy issues, the steady state operation of our retail franchise operations in more normal circumstances could return to annual operating profits of £15m in future years."

Clive Black, analyst at Shore Capital, said: "As may be expected with a global seeking to re-engineer in a pandemic, it has been a period of considerable challenge.

"For the 2022 full-year, Mothercare will be an asset and working capital light franchise with further cost reduction anticipated in distribution, plus the benefits of system implementation.

"Such progress is clearly welcome, albeit very hard work from a financial perspective in Mothercareland."

As at 1130 BST, shares in Mothercare were off nearly 3% at 15.97p.