Investors are spooked by Mothercare’s (MTC) descent into the red, the babywear retailer reporting a swing from a £5.9m profit to a pre-tax loss of £0.7m for the 28 weeks to 7 October.
Struggling Mothercare's shares slump 17% to 69.2p on a downbeat outlook statement too. The structurally challenged maternity products specialist warns of a softening in the UK market due to lower footfall and squeezed consumer spending, as well as challenging international markets, particularly in the Middle East.
Canaccord Genuity analyst Sanjay Vidyarthi says Mothercare's first half like-for-like sales growth of 2.5% fell short of his 3.3% forecast. There was also a miss on gross margin, where a 34 basis point gain fell significantly short of his 60 basis point rise estimate.
Vidyarthi argues this first half miss and weak outlook means there is material downside risk to the £21m pre-tax profit consensus forecast for the year to 25 March 2018.
Shore Capital’s Clive Black believes the negative outlook could lead to downgrades for pre-tax profit expectations, which may be ‘substantial in percentage terms.'
However, he flags that Mothercare is in the midst of material change as it works on enhancing its products, improving its UK estate and developing the digital platform.
