Mothercare boosts recovery hopes

MothercareMothercare has surprised investors as its Jools Oliver and value ranges helped the parenting retailer return to sales growth in the UK.

After slumping into the red by £103 million and losing its chief executive following poor sales, Mothercare brought in new boss Simon Calver to lead a turnaround involving store closures and a revamp of its website.
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Shares in the group, which operates 203 Mothercare and 77 Early Learning Centres in the UK, rose as much as 20% as Mr Calver revealed signs of progress in the UK.

The retailer saw same-store sales rise 0.3% in the 13 weeks to October 13, after a 6.7% drop in the first quarter, while online sales also bounced back to the black.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "The new chief executive appears to have made a good start."

Mr Calver said the chain's value clothing ranges performed strongly, as well as the Little Bird clothing range from Jools Oliver, wife of TV chef Jamie Oliver.

Mothercare closed 31 stores in the first six months as part of its cost-cutting plan, against its target of around 50 closures for the whole year. The wider group, which operates 1,098 international stores, saw total sales decline 7.5% as the impact of the UK store closures offset 10.8% growth overseas.

Matthew McEachran, analyst at N+1 Singer, said while there has been improvement in the UK he believes the promotional market may have weighed on Mothercare's profit margins.

Mr McEachran said: "International, which is the engine for profits while the UK is making losses, is behind plan due to foreign exchange and the eurozone."

He added: "Mothercare always had one of the most advanced global growth strategies but heavy losses in the core UK business reflect a lack of domestic focus by previous management."
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