Mothercare's Middle East woes drag down sales, profits rebound

By

Nigel TAYLOR

Published
Nov 24, 2023

Mothercare continues to be hit by tough trading conditions internationally — especially with “significant headwinds” in its key Middle East ops — as the mother-and-child retail specialist sees sales continue to fall. 

But the good news is that group pre-tax profit has actually risen on cost controls. 

Results for the 26 weeks to 23 September showed international retail sales by franchise partners dipped 15% (down 13% currency-neutral) to £137.2 million. 

These were impacted by the continuing global economic uncertainty alongside the need for them to clear old inventory, it said. There were also fewer stores, down to 500 from 562 a year ago, and Mothercare admitted that number is expected to fall further.

Middle East sales were hit hardest, down 20% on last year. Continuing operations excluding the Middle East were down 6% at constant currency.

It noted the performance in the region, especially Saudi Arabia, “remains challenging having undergone significant changes in recent years”, citing “fiscal and legislative changes and the introduction of many new leisure activities competing for consumers' money… changing consumer behaviour”. 

But it added that “the shape of our partner's retail offering in the country is evolving and we remain confident of the longer-term market opportunity”.

Online retail sales, which account for just 10% of total sales, came in at £13.7 million for the period, although year-ago figures weren’t included.

On the positive side, adjusted EBITDA increased 12% to £3.6 million, reflecting tighter cost controls, and total group pre-tax profit came in at £2 million, up from £0.8 million a year ago.

But net debt increased to £15.8 million (from £11.6 million at 24 September 2022).

Chairman Clive Whiley said the results “are testament to our continued drive to preserve the strength of the Mothercare brand in a fast-changing retail and macroeconomic trading environment. We are pleased that our business model and disciplined approach to cost has resulted in an increase in profitability for the first half.”

He added: “We are acutely aware of the ongoing pressure exerted on our franchise partners' profitability and the consequent need for them to reduce costs and the levels of investment they can make in their businesses.  

“This will likely lead to further reductions in our store footprint in some regions. We are working closely with our key partners to assist them with their recovery, ultimately benefitting both our own business and our franchise partners' businesses when we eventually return to pre-pandemic levels of trading.  We do not currently expect our combined efforts to offset full this impact on the Group results for the financial year to March 2024 and beyond.”