Mothercare's sales continue to dive as restructuring plan finds its feet

Beleaguered mother and baby products retailer Mothercare reported sliding third-quarter sales amid a “difficult” consumer backdrop over the festive period.

For the 13-week period ended 5 January the London-listed company’s total group sales dropped by 18% against the same period last year as Mothercare stated that business suffered due to lower levels of discounting and less clearance stock relative to the prior year.

Total UK sales dropped by 18% as UK online sales fell by 16% amid lower website footfall, while international sales in constant currencies fell by 1.1%.

However, the retailer said it is on track to deliver its strategic transformation plan despite the dropping sales and a year that was pockmarked with profit warnings.

Mark Newton-Jones, chief executive of Mothercare, said: "Whilst the UK continues to be challenging, in part as a result of our planned restructuring, we are still on course to deliver the necessary transformation."

Newton-Jones added that, with the recently completed sale and leaseback of its UK head office, Mothercare has adopted a “leaner” organisational structure in order to reduce levels of debt in the business and reach the target of being debt-free by the end of the current year.

Meanwhile, 36 of the retailer’s stores are transitioning for closure which will leave the business with 79 UK stores by the end of March, down from 137 in May 2018.

"Looking ahead, our International business continues to show signs of recovery, although we expect market conditions in the UK to remain challenging with further disruption until April from our store closure programme. However, given the pace of our strategic transformation plan, our full year profit guidance is unchanged," said Newton-Jones.

A note from Shore Capital said that the trading update made for "painful" reading at first sight but argued that "excellent work" has been done in the financial restructuring of the business.

"At the end of the day, Mothercare’s trading has to improve to harvest the benefits of the difficult re-structuring work undertaken to date. However, the upside potential could be considerable," said the note.

Mothercare’s shares were up 1.66% at 16.00p at 1017 GMT.