Mothercare suffers losses due to poor sales in the Middle East

Mothercare has suffered a first half loss after difficult conditions hit revenue in its Middle East markets.

The children’s products retailer reported a pre-tax loss of £1.8m for the 26 weeks ending September 28, compared with a profit of £1.7m during the comparable period last year.

Retail sales from its franchise partners declined 12 per cent to £121.2 million, which the company said was due to reduced stock and “continued uncertainty” across the Middle East.

Last year, the Watford-based group blamed recent legal and financial changes, combined with the introduction of new leisure activities in the region, for creating greater competition for consumers’ money.

Since then, Mothercare has been expanding its presence in South Asia and recently reached a joint venture agreement with fashion store operator Reliance Brands, whose parent company, Reliance Industries, is the largest private sector corporation in the India.

Under the deal, Reliance paid £16 million to Mothercare in return for a 51 per cent stake in the brand’s intellectual property rights in India, Bhutan, Bangladesh, Sri Lanka and Nepal.

Mothercare has used some of the proceeds from the transaction to refinance its debts with investment bank Gordon Brothers, with whom it had a £19.5m term loan.

It replaced it with a two-year £8m loan charging an annual interest rate of 4.8 per cent and options for Gordon Brothers to buy up to £3.7m of shares.

Clive Whiley, Chairman of Mothercare, said: “We have immediately used this new joint venture in India and its refinancing as a springboard for a deleveraged Mothercare to explore the full spectrum of growth opportunities.”

Since Whiley joined the company in April 2018, Mothercare has endured a tumultuous time due to pandemic-related restrictions, strong competition from supermarkets and online retailers and the large-scale invasion of Ukraine by Russia.

It closed all British stores and cut thousands of jobs in early 2020, shortly after its British subsidiary fell into administration.

While trade recovered somewhat, the group suffered another blow two years later when it decided to exit the Russian market, which had provided 20 to 25 percent of its total sales.

After being without a chief executive for three years, Mothercare hired Daniel Le Vesconte from Abercrombie & Fitch in January 2023 to try to turn things around.

But Le Vesconte left just five months later, with Whiley and chief financial officer Andrew Cook taking over as chief executive.

Whiley further told investors on Monday: “We are now focused on restoring critical mass in addition to meeting our remaining core objectives.”

“This is an exciting prospect for all our partners, colleagues and stakeholders as we can finally put behind us the turmoil of recent years that Mothercare has successfully overcome.”

Mothercare Stock They were down 3.6 per cent at 4p on Monday afternoon, meaning their value has fallen by around 41 per cent this year.