News Column

Mothercare shares up 18% after retailer reports signs of recovery

May 23, 2014

Sarah Butler,

Shares in Mothercare soared nearly 18% after the maternity and childrenswear specialist revealed a 61% jump in underlying profits and confirmed it had agreed new terms with its bankers.

The retailer said on Thursday trading had improved in the fourth quarter of its financial year as it closed lossmaking stores and made its maternity clothing more fashionable.

Sales for the year to 29 March rose 0.5% as a 6.4% rise in international sales to 729.2m helped offset a 7.5% slump in UK sales. Underlying pre-tax profits rose to 9.5m despite a 21.5m loss in the UK.

There was relief as the retailer confirmed that it had persuaded its bankers to give it more breathing space to complete its turnaround plan with improved terms and a 10m increase in its loan facility. The company said it had ended the year with debts of 46.5m as it controlled stocks tightly.

Shares in Mothercare have slumped by more than 50% in the past year as the company endured a dismal Christmas and the resignation of its chief executive, Simon Calver, after a damaging profit warning.

Alan Parker, the chairman of Mothercare, admitted there was a lot more to do despite the improvement in trading performance.

But he added: "We are determined to achieve our goal of returning the UK to profitability, growing our international business and building shareholder value over the long term."

Analysts said Mothercare remained in tricky terrain with no certainty that the interim chief executive, Mark Newton-Jones, would stay on, while the company continues to suffer from expensive UK stores and poor exchange rates on its overseas earnings.

"In our view, any management recovery plan might require more capital and higher lease provisions on an already weak balance sheet," said Mike Dennis, an analyst at Cantor.

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Source: Guardian Web

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