Can Mothercare find a way to stop its stocks from wailing with next Thursday’s interim results?
The company won’t be winning any Mother of the Year awards in 2017. For the first few months of the year things weren’t too bad, with the stock hitting an 8 month high of £1.37 in early May. Since then, however, Mothercare has been rapidly shedding value, eventually falling to a 17 year low of 81.5p on 15th November following a spate of bearish news from the retail sector. Mothercare (LON:MTC) now sits at a current trading price of 86.3p.
Back in May the company revealed a pretty substantial restructuring plan alongside its full year figures. CEO Mark Newtwon-Jones said Mothercare would look to reduce its number of UK stores from 150 to just 70 as it pivots towards a more digital existence (41% of its sales now come online). It also further narrowed focus on expectant parents, new-borns and toddlers, cutting the age range of its products from up to age 10 to up to age 4.
This news came as the retailer saw a 1.1% rise in UK like-for-likes – down from the 3.6% jump seen the year previous – joined by a 4.1% fall in international comparable sales. Total group sales, meanwhile, fell 2.2% to £667.4 million, but with underlying pre-tax profit up 1% to £19.7 million.
Mothercare’s most recent update in July showed signs that this UK restructuring was working. Like-for-like sales in the region rose 1.9%, an improvement on the full year growth revealed in May, while online sales jumped 3.3%.
However, the company’s international arm continued to mar the progress made in the UK. On a constant currency basis sales were down 8.3%, mainly due to ongoing economic uncertainty in the Middle East, but were up 2.2% at actual exchange rates. International online sales, at least, were robust, surging 78% in actual currency.
In terms of Thursday’s half year results, a further improvement in UK like-for-likes, and a decent interim pre-tax profit figure, could help compensate for whatever problems the international division throws up.
Mothercare has a consensus rating of ‘Hold’ with an average target price of £1.29.
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