Mothercare beats forecasts with £9.5m profit

Thursday 22 May 2014 12.24
Mothercare - which also owns the Early Learning Centre - has 21 stores in Ireland
Mothercare - which also owns the Early Learning Centre - has 21 stores in Ireland

British baby goods retailer Mothercare beat full-year profit forecasts and said improved trading had continued into its new financial year, raising hopes a turnaround drive is taking hold.

Shares in the firm rose by as much as 20% on the back of the news.

The firm, which has been hit hard by cut-price competition from supermarket groups and online retailers in its main British market, has been trying to fight back by revamping stores, closing weaker ones and expanding online and abroad.

The firm operates 21 stores in Ireland under the Mothercare and Early Learning Centre brands.

It has reported an underlying pretax profit of £9.5m for the year ended 29 March.

That was a 61% increase on a restated £5.9m a year earlier and ahead of analyst forecasts of £8.3m, due to lower financing costs.

Sales in Britain fell 1.9% on a like-for-like basis, improving on a 3.6% fall a year earlier, with losses narrowing 0.5% to £21.5m.

In its stronger overseas arm, profit rose 7.6% to £45.3m, with underlying sales up 2.5%.

"Mothercare is making progress towards breakeven in the UK in due course and has laid the foundations for further positive growth in International in the year ahead," JP Morgan analysts said in a research note.

The group, which has over 1,200 stores worldwide, said a search for a new chief executive was ongoing. 

The firm named ex-Shop Direct boss Mark Newton-Jones as its interim CEO in March, after Simon Calver quit in February following weak Christmas trading which later forced a profit warning.

Mothercare said it had agreed with lenders to increase its debt facilities by £10m to £100m, just seven months after its last refinancing, in order to give more flexibility to its turn around push.

Due to continued currency weakness, the firm also said it had hedged its Russian rouble, Indian rupee and Indonesian rupiah exposure for the first half of its new fiscal year.