During the recession, many specialist retailers were hit hard by the rising number of discounters which aimed to provide a wide variety of stock at low prices for consumers. One of the chains which struggled was undoubtedly Mothercare, yet there are now signs that a programme of cost cutting measures and store portfolio alterations are beginning to take root.
In the 13 weeks to the 10th of January, the baby goods retailer managed to post a 1.1 per cent increase in UK like for like sales, making 2014 its most strongly performing festive sales period for some time. Furthermore, worldwide sales which take into account both international retail and wholesale income with UK sales rose by 2.2 per cent.
Unfortunately, however, on a total sales basis UK revenues shrank by 1.9 per cent while total group sales – taking into account figures from both the primary business and the Early Learning Centre subsidiary – fell by 2.9 per cent. This, chief executive Mark Newton-Jones claims, was due to the reduction of selling space under the current store closure programme, which saw 4.2 per cent of its UK floor space wiped out during the period.
Mr Newton-Jones used the trading update to highlight the retailer’s refusal to acquiesce to the current festive retailing trend of launching discounts and promotions in the weeks leading up to Christmas Day. Instead, Mothercare chose to stick to the traditional template of ushering in a sales period beginning on Boxing Day; a move which appears to have worked well for the group as a whole.
He said; “Importantly, in the UK, we have continued to reduce the level of promotional activity and went into the end of season sale on Boxing Day with less stock and later than in recent years.
“These actions are re-establishing Mothercare as a full price retailer and in turn stabilising our margin.
“In international, we have seen continued strong growth from all territories, despite the economic uncertainty in some markets.”
Mothercare’s turnaround began in earnest last September when Mr Newton-Jones announced a £100 million investment to stabilise the business and ensure its future through a programme of store closures and refurbishments. This investment was also used to fund IT improvements and eat into the retailer’s mountain of debt.
The attention paid to Mothercare’s online operations certainly seems to now be bearing fruit, as over the 13 week period online sales grew by 16.1 per cent on a year on year basis. This means that online channel activity now makes up 31.8 per cent of the retailer’s UK sales, indicating that the changes are resonating positively with consumers who prefer to make purchases for home delivery and click and collect initiatives.
While Mothercare is by no means out of the woods when the issue of long term survival is raised, this trading update certainly indicates that the steps taken so far have had a positive impact upon consumers.
Do you think Mothercare has proven that a strong turnaround programme can help retailers to survive in the volatile economic environment many face today?
