International growth helps offset UK slump at Mothercare
By BFN News | 07:21 AM | Thursday 12 April, 2012
Specialist retailer Mothercare said worldwide network sales were up 4.3% in the year to end-March, with total group sales up 0.7%. UK sales fell 6.3% and Direct in Home sales fell 3.4%, but International sales rose 16%.
Total UK like-for-like sales were down 6.2%.
In the fourth quarter, worldwide network sales were up 4.5% and total group sales down 4.2%.
International retail sales rose 18%, while total UK sales were down 9.5%, UK like-for-like sales down 8.2% and Direct in Home sales fell 3.2%,
In Q4 worldwide network sales grew by 4.5%, driven by an 18.0% growth in International retail sales. During the year a net 134 stores were opened outside the UK; 27 in the Middle East, 20 in Europe, 76 in Asia-Pacific and 11 in Latin America following the recent launch. There are now 1,028 stores in 58 countries outside the UK.
In the UK, as expected, like-for-like sales were down 8.2% in the quarter, reflecting the decision to clear excess Christmas stock last year. Inventory levels remain tightly controlled and UK stocks are 13.0% lower than last year. This disciplined approach has resulted in an improved UK gross margin performance in the final quarter.
Group underlying profit before tax for the full year is expected to be in line with expectations.
The company said it is rightsizing overheads to fit the new smaller UK operating base. Cost reduction has already commenced and it has identified savings in non-store overhead costs of at least £20m on an annualised basis, by March 2015. The company has commenced consultation to reduce UK head office payroll costs by 16%, which will result in a more simplified and efficient central structure.
There will be a further reduction in the UK store portfolio, reshaping the UK around a profitable core of 200 stores. This will comprise 95 out of town stores and 105 key high street stores (173 Mothercare and 27 Early Learning Centres).
Cash investment is required to fund the UK store portfolio reduction and cost saving programme. Over the next three years this is estimated to be £35m in total.
Accordingly, Mothercare has agreed the refinancing of banking facilities with the support of the two existing banks, HSBC and Barclays, increasing the level of committed facilities from £80m to £90m and extending the term to 31st May 2015.
In addition, given the cash investment required in the business, the Board has concluded that the Company will not pay a dividend until the Transformation and Growth strategy is delivering benefits.
Alan Parker, Executive Chairman said: "Since November, a significant amount of progress has been made across the business. We launched a structural and operational review, appointed a new CEO, closed a significant number of underperforming stores and commenced a consultation programme to streamline our head office function. We have also introduced immediate initiatives aimed at improving value and service for our customers.
"Today we have announced the framework of our decisive three year strategy to restore the UK business back to profit and strengthen our foundations for growth. This will see us operate a lean, more competitive business, focused on the existing profitable stores in a smaller UK portfolio, combined with a state of the art online platform. Our International business continues to perform strongly and we plan to further accelerate growth.
"We now have the cornerstones of our Transformation and Growth strategy in place. Simon Calver joins us later this month and brings with him invaluable business change skills plus e-commerce and international brand expertise. Simon will take whatever action is necessary to deliver the strategy and, as such, will present his detailed plans in May.
"Mothercare is a great global brand with strong international partners. Today marks the beginning of a three-year turnaround and I am confident we will deliver a sustained recovery and long term success."
Preliminary results for the year to end-March will be announced on 24th May. Story provided by StockMarketWire.com