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Mothercare improves sales in Q4 yet still warns on currency effects

By Angela Gonzalez-Rodriguez

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Business

The fourth quarter saw Mothercare improve its sales at home and abroad, but currency headwinds are still blowing.

"The final quarter is in line with our plan. In the UK our strategy of reducing promotional and discount activity and returning to being a full price retailer has continued to stabilise margin. By restricting discount periods we produced a stronger end of season sale with improved sell through rates as a result,” explained the company on Wednesday.

"It is still early days in our turnaround, but we are putting the foundations in place by modernising and investing in our business," Newton-Jones said in a statement. Total full-year sales for the 52 weeks to 28 March came in down 1.5 percent.

In the UK sales rose 1.5 percent on a year-on-year basis, marking a turning point: an improvement after consecutive declines in previous quarters. Like-for-like sales were also up, advancing 5.1 percent after a 4.5 percent reduction on space as it closes stores, publishes ‘City A.M.” Meanwhile, online sales added a good 31.8 percent for the 11 weeks to the end of March.

Meanwhile, sales abroad also improved, by 11.4 percent on the same period last year in constant currencies, offset though by currency jumps which reduced sales to 5.5 percent on an actual currency basis.

Like-for-like sales and online trading, big winners in Q4

“Like-for-like and online sales have also benefited from this approach along with the initiatives to improve product and service put in place during the year. In International, the underlying businesses remain robust but economic pressures have affected sales," said CEO Mark Newton-Jones.

It is worthy a note that last September, Mothercare’s CEO attracted investors to put in 100 million pounds to help fund a restructuring, which will include store closures and revamps and improvements to its product range. The company has also moved to a more full-priced stance over promotions to protect margins, reports Reuters.

On a related note, Brokers at Numis expect current trading at the retailer to benefit from cost-cutting, store and product improvements and less pressure from a strong pound.

Mothercare plc (LON:MTC)‘s stock had its ‘sell’ rating reiterated by research analysts at Cantor Fitzgerald Europe in a report released on Tuesday. They currently have a 90 pence target price on the stock. Cantor Fitzgerald Europe‘s price objective would indicate a potential downside of 56.66 percent from the company’s current price, highlight various analysts following the stock.

Mothercare plc shares have a 52 week low of 107.1410 pence and a 52 week high of 240.8280 pence, giving the company a market cap of 186.05 million pounds.

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