Mothercare profits slump amid uncertainty over Middle East
Mothercare saw profits and sales drop in its latest pre-close update, which it attributed to the "continued impact of the uncertainty in the Middle East" upon its franchise partner.
Mothercare reported its profits had plummeted in its latest pre-close update, which it attributed to the “continued impact of the uncertainty in the Middle East” upon its franchise partner.
The nursery specialist adjusted EBITDA for the period covering 52 weeks to 29 March came in at £3.5m, falling from £6.9m compared to the same time last year.
Retail sales via its franchise partners plunged 18% to £231m.
Mothercare explained that its Middle East franchise partner had “reduced the store numbers of many of its brands and specifically for Mothercare, and store numbers across the year have reduced by 47”, as of March this year.
Although the sales drop was also blamed on franchise partner problems in the Middle East, the brand highlighted that revenues were impacted in the UK due to the end of its “exclusive distribution relationship with Boots”.
However, it noted that this marked a “greater opportunity for the brand and a new partner in the UK”.
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Mothercare claimed that the “underlying strength” of its brand was highlighted by the fact that “excluding the UK, on a like-for-like basis” its total retail sales came in positive for the full year to March, “despite the prevailing global economic uncertainties”.
The brand’s chair Chris Whiley said: “Our results for the last year reflect the impact of the continuing uncertainty on our franchise partners’ operations in the Middle East.
“However, the de-leveraged business resulting from the recent India joint venture and refinancing, together with the ongoing support of our lender and pension trustees, is enabling us to continue to explore the full bandwidth of growth opportunities through connections with other businesses, the development of our branded product ranges and licensing within and beyond our existing perimeters.”
In October, Mothercare revealed that it was planning to expand into several Asian markets, as it secured £24m in additional financing.
The company entered a joint venture with Reliance Brands UK covering its IP assets in India, Nepal, Sri Lanka, Bhutan and Bangladesh.
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