Mothercare’s share price soars as group losses narrow under Mark Newton-Jones turnaround plan
Mothercare's share price soared more than six per cent this morning as the turnaround under chief executive Mark Newton-Jones takes shape, with group losses narrowing by nearly a third.
The figures
Underlying pre-tax profits at the childcare retailer soared 37 per cent to £13m for the 52 weeks to March 28. After exceptional items the group made a loss of £26.1m, down from £35.8m last year.
UK like-for-likes rose two per cent, with gross margins stablised, but total UK sales dropped 0.9 per cent as the retailer began the process of shutting underperforming stores. Losses for the UK narrowed from £21.5m last year to £18m this year.
International like-for-likes rose 5.6 per cent on a constant currency basis, and rose 12.4 per cent on a total basis. Profit was up one per cent to £45.9m.
Why it's interesting
Newton-Jones took on the role just over a year ago, acknowledging that plenty of work was needed to turn the ailing retailer around, but convinced it could be done. Today's figures suggest that he was right – although clearly the pain is not over.
Back then, the former Shop Direct boss outlined six “strategic pillars” that he said the future of Mothercare would be built on; today he said progress had been made against all six.
Unsurprisingly given his background, digital growth has been key, with online sales up 18 per cent. A third of UK sales now come from click-and-collect.
A further 31 loss-making stores have been shut, while two stores have been refurbished with a trial format focusing on clothing.
Product quality, style and innovation has been enhanced, and more clothing and footwear lines introduced as well as homeware and toys.
Margins have been stablised after five years of decline as Mothercare returns to “being a full-price retailer, with shorter discount periods and better planned promotions”.
Cost management has improved, and stock cover reduced.
Mothercare has built on its international strength, increasing space nine per cent in the year and launched in South Korea.
What they said:
Chairman Alan Parker said:
"This year has been one of major change for Mothercare. We recruited a new chief executive and chief financial officer, entered into new financing arrangements with our banks, saw off an unwelcome takeover approach and successfully completed a rights issue.
“I am confident that we now have the right leadership and plans to achieve our clear potential of being a world leading global retailer."
Newton-Jones added:
“This has been an extremely busy year for Mothercare. During the year we have completed a successful refinancing and we have created a new strategy with our customers in mind to modernise and reinvigorate the Mothercare and ELC brands. A new executive board has been recruited to turn our strategy into reality.”
“Our international business has delivered growth in terms of space, sales and profit, in spite of increased economic and foreign currency headwinds. In the UK we have seen our new full price trading strategy and investment in product and service result in stabilised margins and like-for-like sales growth.”
“We are making good progress against all six pillars of our strategy and we will continue to build from this platform in the year ahead. There is still much to do and trading conditions may remain challenging, but we will stay singularly focused on our vision of being the leading global retailer for parents and young children.”
In short
Mothercare had plenty of problems – many of which were exacerbated by the prior management – but investors will be encouraged by the initial signs of improvement.