Mothercare progress dented by slow UK recovery

LONDON (Reuters) - British baby and maternity products retailer Mothercare reported a better than expected rise in full-year profits on Thursday, but also revealed a slow pace of recovery at the group's core UK business.

Mothercare's UK division, which accounts for 40 percent of group sales and is competing with a growing number of online retailers and supermarkets, made a loss of 21.7 million pounds for the year, after a 24.7 million pounds loss a year earlier.

New chief executive Simon Calver has embarked on a three-year turnaround plan, under which 56 UK stores have closed in the year to the end of March, ahead of a target of 50 closures.

As part of the plan Mothercare has also revamped its remaining UK stores, adding Costa Coffee concessions and play areas, and is trying to push online sales.

Calver told reporters Mothercare would close 30 more UK stores in 2012/13, during which it expects to grow profits.

"The first year of any turnaround plan is challenging but we do see profit growth continuing this year and we're happy with the consensus out there," he said.

The company is expected to report an average pretax profit of 18 million pounds for the year to the end of March 2014, according to Thomson Reuters data.

Many UK retailers are finding the going tough as consumers, whose spending generates about two-thirds of UK gross domestic product, fret over job security and a squeeze on incomes.

The group, which has 1,300 stores worldwide including 250 in Britain, reported underlying pretax profit of 8.3 million pounds ($12.5 million) for the year to April, up from 1.6 million pounds a year earlier and above the average 7.2 million pounds forecast in a Thomson Reuters poll.

Total group sales fell 7.8 percent to 749.4 million pounds, reflecting the closure of loss-making stores in Britain.

Shares in the firm fell as much as 7 percent in early trade but recovered slightly to be 2.3 percent down at 356.3 pence by 0835 GMT, valuing the business at around 300 million pounds.

"We remain unconvinced that the strategy will return the UK to profits in 2015 and believe the risk is not reflected in the valuation," said Cantor analyst Kate Calvert, who holds a 'sell' recommendation on the stock.

"Management is undertaking this brand repositioning in challenging markets where competition is fierce."

Underlying profit at its international business rose a fifth to 42 million pounds, despite some weakness in Europe.

The company's net debt rose 61 percent during the year to stand at 32.4 million pounds at the end of March.

(Reporting by Rhys Jones; Editing by Sarah Young and Jane Merriman)

Source: http://news.yahoo.com/mothercare-full-profit-boosted-turnaround-plan-062045123.html

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