Mothercare returns to profit, but supply chain issues and lockdowns hit trade
Mothercare returns to profit, but supply crisis and lockdowns hit trade for retailers who survived administration
- Mothercare revealed global retail sales fell modestly to £184.3m in the first half
- Asian manufacturers hit by shutdowns and power outages
- The company expects its franchise partners to reach around £500m in revenue next year
Mothercare has returned to profitability despite acknowledging that it has been significantly affected by supply chain disruptions and store closures.
The baby product seller posted a profit of £3.6m in the six months to September 25, compared to a loss of £13.2m in the 28 weeks to October 10 last year.
But global retail purchases for the period fell modestly to £184.3 million and were still more than a quarter below what the company would normally expect.
Recovery: The baby product seller posted a profit of £3.6m in the six months to 25 September against a loss of £13.2m in the 28 weeks to 10 October last year
In addition to the closures that forced stores to temporarily close, the company noted that its factories in India and Bangladesh had been hit by restrictions, while producers in China were hit by power outages.
It added that international shipping issues were causing its franchise partners to receive products later than expected, including those for the Fall/Winter 2021 season, and impacting their ability to sell them at full price.
But it said the various measures it had taken to increase its profitability “have been fruitful”, adding that it is “well placed for further performance improvements as retail sales around the world return to their pre-pandemic levels.” .
These include cutting administrative costs, which were down 13 percent from last year, revising brands, reshaping the supply chain to increase delivery times and reduce costs and complexity, and integrating a new enterprise. resource planning system.
Mothercare said: “While we remain cautious given the ongoing pandemic restrictions and supply chain headwinds, we believe the second half of this fiscal year should deliver a performance comparable to the first half.”
The company has had a rough few years due to declining sales, stiff competition from rivals such as supermarkets and years of losses, before falling into administration in 2019, leaving 2,500 jobs at stake.
Tie-up: Mothercare struck a deal with Boots in the month after it collapsed to sell some of its branded products in multiple chain-owned stores
Chairman Clive Whiley has been criticized for making nearly £1million since taking over from his predecessor in April 2018 and for taking another job with funeral director Dignity just two months before Mothercare went into administration.
After entering the administration, the Watford-based retailer subsequently closed all of its stores in the UK, where it has become an online-only business, but has 740 international branches operated by franchisees.
Mothercare also struck a deal with Boots in the month after it went bankrupt to sell some of its branded products, such as strollers, clothing and car seats, in multiple stores owned by the pharmacy chain.
It stated that if there is no additional major impact from the coronavirus, it expects its franchise partners to achieve revenues of around £500 million next year based on the amount of goods they have committed to buy for the two seasons of 2022.
While she said the company’s results “show we are getting closer to unlocking Mothercare’s true underlying potential, reflecting the strong foundation we’ve built for the company over the past few years, despite the impact that Covid-19 still had during that period’.
“With positive feedback on our new product ranges and a lean business structure, we enter the second half with growing confidence for our future prospects.”
Shares in Mothercare were up 3.1 percent to 19.4p during late morning today, meaning their value is up more than 70 percent since the start of the year.