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Mothercare PLC (MTC)

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Thursday 17 July, 2014

Mothercare PLC

Mothercare Plc : Interim Management Statement

Mothercare Plc : Interim Management Statement

Interim Management Statement

Mothercare plc, the leading international mother and baby retailer, today issues the following trading update, which covers the 15 week period to 12 July 2014.

Overview for Q1 - 15 weeks to 12 July 2014

  • International back to double-digit growth with space up 13.3% and constant currency sales up 14.7%. As anticipated currency devaluation has impacted reported retail sales
  • Global retail space up 7.1% year-on-year with 4.5 million sq.ft. and 1,476 stores in 60 countries
  • UK like-for-like sales up 0.9% and decline in total UK sales in line with space reduction
  • Worldwide network sales up 0.2% with Group reported sales down 1.8%
  • Reduced discount activity in the UK has led to lower sales online at better cash margins, which was in line with expectations
  • Mark Newton-Jones confirmed as Chief Executive Officer today

Group performance for 15 weeks to 12 July 2014

 15 weeks to:
 12 July 2014
 % change year-on-year
Worldwide network sales(1)  0.2
Total group sales   (1.8)
International retail sales in constant currencies (1)  14.7
International retail sales in moving currencies(1)  0.8
International space (change in sq.ft.)   13.3
Total UK sales   (1.2)
UK like-for-like sales(1)  0.9
Direct in Home sales   (6.4)
UK space (change in sq.ft.)   (2.4)

Alan Parker, Chairman of Mothercare plc, said:
"I am delighted to welcome Mark Newton-Jones as Chief Executive Officer. Mark is a first-class retailer with more than 30 years of experience and a highly successful track record.  His business transformation expertise gives me confidence that we will achieve our plan to turnaround the UK business and continue our strong International growth.

"Mark has already made a substantial difference in many areas since he joined us, including the introduction of a new approach to trading and we have made an encouraging start to the year. I am pleased that our International business has returned to double-digit constant currency growth and the UK has reported a small positive number for like-for-like sales growth."

Mark Newton-Jones, Chief Executive Officer of Mothercare plc, said:
"I am very much looking forward to leading the Mothercare Group at this pivotal time in its history and to be here to lead the turnaround of the business.

"Mothercare and Early Learning Centre are two iconic UK retail brands which have both developed into significant international businesses, serving parents and young children in 60 countries. We now need to put in place the building blocks to strengthen the UK performance and I believe there is then a tremendous opportunity to take this business forward. It will be a pleasure to work alongside Mothercare's team of passionate and knowledgeable colleagues as we rebuild the UK and continue to grow our global presence."

Update on Q1 trading
International space was up 13.3% and the stores generated mid-single digit like-for-like sales and double-digit constant currency retail sales growth of 14.7%. As anticipated currency devaluation impacted the reported number and the hedging policy now in place is mitigating some of this risk.

Our UK performance, helped by the work the team has delivered over the last year, is starting to stabilise sales as seen in our like-for-like sales which grew slightly to 0.9%. We are taking a different approach to the business, by moving away from aggressive discounting and concentrating on full price sales. This has impacted online sales where most discounting has traditionally taken place.

CEO's initial thoughts
I have been fortunate enough to meet a number of our franchise partners. Having done so, I am particularly struck by their enthusiasm for both brands - Mothercare and Early Learning Centre - and the knowledge they have of their home markets. My initial view is that this is a robust business model with further growth opportunity.

In the UK, my early observation is that the business needs modernising and requires investment in its infrastructure, its stores and its Head Office systems. As a result many of the retail practices need updating, when we compare ourselves to more modern retailers. However, in spite of this, we still have high levels of customer loyalty and two great brand names in Mothercare and Early Learning Centre. Initially we shall concentrate on four themes to fix the basics. These are:

  • Cost reduction and cash generation
  • Rebuild gross margins
  • Improve service both online and in store
  • Product improvement

These retail basics form our initial efforts and I will share more detail on our future strategy and how we intend to reinvigorate the business in the Autumn.

Financial position
There has been no material change in the underlying financial position of the business since the beginning of the period.

Conference call
A conference call for Analysts will be held at 08:30hrs today.

Investor and Analyst enquiries to:
Mothercare plc
Mark Newton-Jones, Chief Executive Officer
Matt Smith, Chief Financial Officer
Ramona Tipnis, Director of Investor Relations                                   01923 206455

Media enquiries to:
Anna Harland (Mothercare plc)
Katharine Wynne (Tulchan Communications)                                      020 7353 4200

1 - UK like-for-like sales are defined as sales from stores that have been trading continuously from the same selling space for at least a year and include Direct in Home and Direct in Store. International retail sales are the estimated retail sales of overseas franchisees and joint ventures and associates to their customers. International like-for-like sales are the estimated franchisee retail sales from stores that have been trading continuously from the same selling space for at least a year. Total International sales are International retail sales plus International Wholesale sales. Worldwide network sales are total International sales plus total UK sales.

2 - This announcement contains certain forward-looking statements concerning the company. Although the Board believes its expectations are based on reasonable assumptions, the matters to which such statements refer may be influenced by factors that could cause actual outcomes and results to be materially different. The forward-looking statements speak only as at the date of this document and the company does not undertake any obligation to announce any revisions to such statements, except as required by law or by any appropriate regulatory authority.

3 - Overall space was up 7.1% year-on-year at the end of the first quarter with space in the UK down 2.4% year-on-year and International space up 13.3% year-on-year.

Space (k sq.ft.)Q1 FY2014Q2 FY2014Q3 FY2014Q4 FY2014
UK 1,770 1,770 1,760 1,737
International 2,430 2,505 2,610 2,656
Stores (#)Q1 FY2014Q2 FY2014Q3 FY2014Q4 FY2014
UK - Mothercare 192 191 191 189
UK - ELC 50 46 40 31
Total UK242237231220
International - Mothercare 745 766 801 819
International - ELC 371 390 400 402
Total International1,1161,1561,2011,221

Space (k sq.ft.)Q1 FY2015Q2 FY2015Q3 FY2015Q4 FY2015
UK 1,728  
International 2,753  
Stores (#)Q1 FY2015Q2 FY2015Q3 FY2015Q4 FY201
UK - Mothercare 186  
UK - ELC 25  
Total UK211 
International - Mothercare 854  
International - ELC 411  

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Mothercare Plc via Globenewswire