Global parenting retailer Mothercare (MTC) is among Thursday's notable fallers, the shares slumping 15.7% to 159p on confirmation the storms battering its overseas business show no signs of abating. Boss Mark Newton-Jones warns the international arm continues to suffer from both economic and currency headwinds, though the turnaround of the maternity product purveyor's UK business is making modest progress.
SHARES has consistently expressed concerns over the challenges facing Mothercare, a running Play of the Week on which we have a short position; these include a still-uncertain UK turnaround, its struggling international operations as well as some underappreciated-yet-rising competitive threats.
In February, we flagged the potential for disappointments alongside today's fourth quarter update and a downbeat missive has duly arrived, only validating our bearish stance on the specialist retailer for parents and young children.Newton-Jones expects Watford-headquartered Mothercare to deliver underlying full-year profits 'within the range of current market expectations', though the update on the international division, trading via 1,310 Mothercare and Early Learning Centre (ELC)-branded stores, has rattled investors.
'International continues to be adversely affected by the sustained economic and currency headwinds. Whilst all four regions are softer, the Middle East and China in particular have been impacted by weaker consumer confidence,' says the CEO.
At actual and constant currency rates, Mothercare's international sales crashed by an alarming 10.8% and 9.7% respectively over the 11 weeks to 26 March, a sustained lower oil price impacting Middle East sales, China hit by weaker consumer confidence and both Europe and Latin America impacted by unhelpful foreign exchange swings. There's also a gloomy outlook, Mothercare reckoning its overseas markets will remain challenging into the new financial year.
There are crumbs of comfort for Mothercare on home turf however, the UK business having delivered an eighth consecutive quarter of positive like-for-like sales growth and a full year of improved margins. Like-for-like sales rose 2.1% in Q4 with a boost from burgeoning online sales, while stronger gross margins reflected a fervent focus on selling product at full price.