The UK High street is a hellish place for mid-sized retailers at the moment as tax rises and the public sector pay freeze take large lumps of out of UK consumers’ wallets (or purses in this case). Mothercare is the latest company to announce dramatic cutbacks.
Here’s the BBC’s account of its current travails.
Mothercare has said it will close more than a quarter of its UK stores over the next two years as part of its plans to reduce its High Street presence.
The company also reported a slump in full-year profits as UK sales fell due to bad weather in the run-up to Christmas and increased competition.
This meant the group had to cut margins to shift unsold stock.
Pre-tax profits for the year to 26 March were £8.8m, down from £32.5m a year ago.
By March 2013, the company said it planned to have reduced its total store numbers to about 266 from 373.
It said it was “in the fortunate position” of having 120 leases expiring in the next two years.
The company said it should benefit to the tune of £4m to £5m a year after tax from the store closures.
The closures form part the group’s ongoing strategy of reducing its High Street store portfolio and focusing more on out-of-town stores, and on its online and wholesale businesses.
Like-for-like UK sales in the year to the end of March fell by 4% due to “adverse weather conditions in key trading weeks before Christmas, together with a general weakening in the consumer environment and increased competition”, the company said.
This led to clearance sales of autumn and winter stock, in particular toys, which hit profit margins.
As a direct result, Mothercare said underlying profit in the UK for the period was £11.1m compared with £36.1m a year earlier.
However, against this disappointing UK performance, the company said it had seen a “record year internationally”, with total sales up 16.3%.
This helped to drive a small increase in revenue to £793.6m.
“In the new financial year, we expect international to continue to grow retail sales by 15% to 20% with 150 new store openings,” said chief executive Ben Gordon.
Earlier this year, the company warned that full-year profits would be significantly lower than market expectations.
Perhaps they could merge it with HMV?