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Bloomberg
Mothercare Plc reported a sharp drop in UK sales over the holiday season, underlining the depths of the country’s retail crisis as store owners wrestle with higher costs and a shift to online shopping.
Like-for-like sales in the UK declined 7.2 percent in the past 12 weeks, the childrenswear retailer said on Monday. Gross margins are also set to fall due to higher levels of discounting required to reduce stock in post-Christmas sales, the company said. The shares plummeted as much as 32 percent, the biggest intraday decline on record.
Mothercare is far from alone in its woes. The Brexit-induced weakness of the pound and increases in the minimum wage have inflated UK retailers’ costs, and poor Christmas sales are bringing these issues to a head. Debenhams Plc warned that its full-year profit would miss estimates due to weak holiday business, while its department-store rival House of Fraser Ltd. is seeking rent reductions from landlords.
Mothercare, which has sold inexpensive baby clothes, strollers and nursery furniture since 1961, has lost market share to grocery chains and Amazon.com Inc. in recent years. That’s been compounded by a squeeze on disposable incomes.
“When consumers are confident they’re going to get a pay rise, then they might splash out on a new pram or car seat, but at the moment they will be more inclined to just buy it secondhand,†TCC Global analyst Bryan Roberts said.
Other children’s retailers are feeling the Amazon effect as well. In December, Toys “R†Us Inc. narrowly escaped liquidation in the UK.
Mothercare expects full-year pretax profit to be between 1 million pounds and 5 million pounds.