Mothercare interim profit surges as expansion plans continue

Baby goods retailer Mothercare said it had started to reap the benefits of its turnaround strategy after its interim profit more than doubled.

In the six months to 10 October, the London-listed company reported an underlying profit before tax of £7m, 112% higher than in the corresponding period in 2014, after it UK business losses more than halved to £6.1m.

The group has implemented a new approach over the last 12 months in a bid to revive its UK business, which has suffered heavy losses in the last five years due to cheaper competition from the likes of Primark and Amazon.

The strategy seems to be paying off, with sales at UK stores open for longer than 12 months rising 3.8% year-on-year, while total UK sales edged 0.4% higher to £236.6m.

Group chief executive Mark Newton-Jones said the company was no longer attempting to compete with supermarkets at the lower-cost end of the market and was in fact targeting an “aspirational” customer base.

However, Mothercare saw underlying profit in its international division declined 14.2% year-on-year to £21.7m because of strong currency headwinds, while sales at its international stores that have been open for over a year declined 2.3%.

Nevertheless, the group has continued its expansion in the foreign market and its international retail space grew 6.6% in the past six months and now accounts for 66% of total retail space and 61% of total sales.

"Rather than retrench where economies are becoming tougher, we are taking the polar opposite approach and we are continuing to put space down," Newton-Jones said.

"When the economies do all settle down, we will be in a great position for growth."

Mothercare shares were down 3.37% to 222.00p at 1458 GMT on Thursday.