Mothercare loss widens but UK shows revival signs

Mothercare reported a wider annual loss but its shares jumped on Friday as the children's retailer reported signs of improvement in UK trading.

The company's pre-tax loss was £87.3m in the year to the end of March compared with £72.8m a year earlier as sales fell 7.9% to £1.07bn. The pre-tax loss from continuing operations narrowed to £66.6m from £94m.

Mothercare came close to going bust in 2018 and only survived by shutting stores, cutting jobs and raising fresh funding. The company has suffered from poor UK sales as shoppers have moved online, tightened budgets and failed to be enthused by its products.

UK like-for-like sales fell 8.9% as total retail sales dropped 15.8% and online sales fell 8%. The company blamed the effect of economic uncertainty on consumer spending, stock problems and bad publicity caused by its troubles. International sales in constant currency fell 0.3%. Business was healthy in Russia, China and Indonesia but weak in the Middle East.

Chief Executive Mark Newton-Jones said UK trading showed signs of picking up in the current year and that the business was on a more solid footing. Mothercare shares rose 12.75% to 23p at 0912 BST.

Newton-Jones said: "We have achieved a huge amount this year, refinancing, restructuring and reorganising Mothercare to ensure a sustainable future for the business. The majority of that work is now done, including the completion of our store closure programme, leaving us with 79 stores which are well positioned to support our UK customer base.

"In the early stages of this financial year, we are seeing some improving UK trends as we continue to rebuild to be the specialist retailer for parents and young children."

Mothercare delayed its results by a day because they were so complex after a year of restructuring. Independent retail analyst Nick Bubb said: "The results do indeed look complicated … Despite the big losses and write-offs, there is an honest and upbeat tone to the statement."

Clive Whiley, Mothercare's chairman, said expensive professional advisers were brought in as directors, lenders and investors fell out with each other. Adviser costs mounted to £10m in 2018 so that threatened to overwhelm the company, he said.

"Had the recast board not acted decisively in curtailing professional costs in April 2018 and, more importantly, bridged the disconnect between our relationship banks and our equity providers, these costs alone could have rendered the business unsalvageable," Whiley said.