International sales at Mothercare exceeded UK revenue for the first time as the maternity and babycare retailer on Thursday warned of further margin declines in its home market in the coming months.
The retail group revealed like-for-like sales in the UK fell sharply in the 15 weeks ending in early July and warned it would have to cut prices in its home market to remain competitive.
Total UK sales, which includes stores open less than a year, fell 2.6 per cent but faced strong comparisons during the same period last year. Total group sales were up 0.4 per cent boosted by its international franchise operation which reported an 8 per cent increase in sales.
Ben Gordon, chief executive, said Mothercare had planned for a drop in like-for-like sales in the UK and was preparing to cut prices in the coming months.
“We think we will be a bit more promotional than we have been, and we will be a little bit sharper on the pricing to ensure that our prices are very competitive within the market,” said Mr Gordon.
He declined to specify by how much margins would fall by but the share price fell more than 5 per cent in early trade to 524p.
Mothercare has in recent years sought to reduce its presence on UK high streets and move to purpose built out-of-town stores to improve its performance in the UK.
”We’ve opened quite a few out-of-town stores over the past 12 months and those have a tendency to cannibalise our existing estate in their first year,” said Mr Gordon.
The retail group also announced the acquisition of Blooming Marvellous, a maternity-wear and baby clothes brand, but declined to disclose the price of the acquisition.
The one bright spot for the UK was the group’s internet business, which saw sales growth of 14 per cent, helped by the introduction to the website of the full-range of Mothercare baby clothing six months ago, and the relaunch of the website of the Early Learning Centre, its children’s toy shop chain.
The group’s international stores fared much better than the UK shops, with foreign retail sales up 20 per cent, boosted by new store openings. Mothercare operates a franchise model for its international stores and added 56 shops overseas in the quarter, increasing its international retail space by 6 per cent. Mothercare plans to open at least 100 stores this year, focusing on Russia, India, China and Australia.
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