Mother and baby products retailer Mothercare has launched a review of its struggling British business after a dire first half in its home market eclipsed strong growth overseas, plunging the group into loss.
Chairman Alan Parker said today that the review "rules nothing in or out" for the 352-store British business. "The review will be looking at the right size and shape of our UK business. I must say though that I am quite confident there is a profitable UK business for Mothercare," he said.
Parker, who assumed temporary executive responsibilities after chief executive Ben Gordon left last month following a third profit warning this year, said the review will be completed in the first quarter of 2012.
Mothercare is battling intense competition in Britain from supermarkets and internet players, as well as consumer uncertainty in the face of tough economic headwinds. In May, it detailed plans to close about 110 British stores over two years as leases expire.
The company said it made an underlying pretax loss of £4.4m sterling in the 28 weeks to October 8, compared with a profit of £12.2m the same time last year. After booking exceptional charges of £78.5m relating to the restructuring of the British business, the company made a pretax loss of £81.4m.
The first-half performance reflected a near 10% second-quarter sales slump at British stores open more than a year, as trading deteriorated after the August riots, particularly in bigger-ticket items such as push chairs and car seats.
Total first-half group sales rose 4% to £413m. British sales fell 4.3% and the division swung to an operating loss of £18.5m.
"Even taking the weak consumer environment into consideration, the performance in the UK indicates a business which has lost its way in its home market," said Parker.
Mothercare's international sales from 975 stores in 55 countries rose 15.7% and operating profit increased 16.5% to £18.4m. "Our international business has great potential, particularly in developing markets where we are only constrained by our capacity to grow," said Parker, who expected international sales to continue to grow 15-20% a year, with 150 stores opening every year.
Parker said the search for a new CEO was proceeding to plan, with the board having already reviewed a candidate list. The company, which ended the half with net debt of £24.6m, cut its interim dividend to 2 pence from 6.4 pence.
