Mothercare, a leading mother-and-child retail specialist, confronts headwinds in its key Middle East operations but reports a surge in profits through effective cost management. Despite a 15% dip in international retail sales by franchise partners to £137.2 million during the 26 weeks to September 23, the company has successfully boosted its group pre-tax profit.
Sales in the Middle East, particularly in Saudi Arabia, experienced a substantial 20% decline, contributing to an overall 6% drop in continuing operations at constant currency. Mothercare attributes this to global economic uncertainty, inventory clearance, and changing consumer behaviors due to fiscal and legislative changes in the region.
Optimistically, Mothercare sees a long-term market opportunity, noting the evolution of its partner’s retail offering in the Middle East. The company has strategically reduced its store count from 562 to 500, with expectations of further reductions.
Online retail sales, accounting for 10% of total sales at £13.7 million for the period, showcase Mothercare’s digital presence. Encouragingly, adjusted EBITDA increased by 12% to £3.6 million, reflecting efficient cost controls. Total group pre-tax profit reached £2 million, a notable increase from £0.8 million a year ago.
Despite positive financial results, the report indicates a rise in net debt to £15.8 million from £11.6 million in September 2022.
Chairman Clive Whiley expresses satisfaction with the results, emphasizing the company’s commitment to preserving the strength of the Mothercare brand in a dynamic retail and macroeconomic environment. While aware of ongoing challenges faced by franchise partners, leading to potential store footprint reductions, Mothercare emphasizes collaboration to support recovery efforts.
While the combined efforts may not fully offset the impact on group results for the financial year to March 2024 and beyond, Mothercare remains focused on navigating the changing landscape and returning to pre-pandemic levels of trading. Explore the comprehensive report for insights into Mothercare’s strategic initiatives and financial performance.
