Mothercare international sales hit by weakness in Middle East

Mothercare reported a rise in first-quarter UK sales, but the performance of its international business was less impressive, dented in particular by weakness in the Middle East.

In the 15 weeks to 8 July, total UK sales fell 1.8%, but sales on a like-for-like basis were up 1.9%. International retail sales in actual currencies were up 2.2% but at constant currency they were down 8.3%, primarily driven by weakness in the Middle East.

The retailer said it opened 26 stores and closed 43 during the period, mainly driven by market exits as it consolidated partners, including Kazakhstan, ending the quarter with around 2.9m sq.ft and 1,133 stores.

Chief executive officer Mark Newton-Jones said: "We have continued to make progress in the UK during the period. We have seen customers respond well to our end of season sale, which we entered with less stock than last year, and are achieving a higher sell through rate. Whilst online sales recorded a lower growth, in contrast to higher sales growth in store, we don't believe this represents an underlying permanent shift in customer behaviour. We are about to launch our autumn ranges, but it remains uncertain how consumers will respond to inflation.

"In our international business, the challenging economic conditions in the Middle East continue and are impacting overall performance, and so the outlook remains volatile. We continue to export our learnings from the UK as our business improves here, to support our partners with the modernisation of their franchise businesses, and see further opportunities for growth both online and in stores."

Canaccord Genuity said the trading update leaves Mothercare "with its work cut out" to hit FY18E consensus pre-tax profit estimates of around £21m.

"However, we make no change to our £21.1m (9.9p) estimate at this early stage of the year," it said, as it maintained its 'sell' rating on the stock.

At 0850 BST, the shares were down 2.4% to 99.36p.