January 8, 2018 / 7:34 AM / 9 months ago

Mothercare slashes full-year profit forecast, shares sink

(Reuters) - British baby goods retailer Mothercare Plc (MTC.L) warned that its full-year profit would be much lower than expected as it did not see any improvement in the UK market in the short term, sending its shares tumbling to their lowest ever.

FILE PHOTO: Customers leave a Mothercare shop in London October 11, 2008. REUTERS/Suzanne Plunkett (BRITAIN)

Mothercare said adjusted group profit for the year ending March was likely to be in the range of 1 million pounds to 5 million pounds, sharply lower than the 10 million pounds it previously expected.

The company earned 19.7 million pounds in the previous year.

The update highlights the continuing impact of weak footfall across retail destinations, the disruptive nature of online as well as discount players, and the need for a differentiated product offering, Liberum analysts said in a note.

The sales decline and cautious outlook comments knocked shares in the retailer to a life-low of 42.05 pence. They were trading down 26 percent at 45.80 pence at 0928 GMT.

Mothercare, which has been trying to revive its British business that has come under pressure from tough competition, said UK like-for-like sales fell 7.2 percent in the 12 weeks to Dec. 30.

Online sales in the UK fell 6.9 percent during the 12 weeks to Dec. 30, including the key Christmas season.

The profit warning comes a year after Mothercare’s UK sales returned to growth following heavy losses for several years. Competitive pricing by rivals such as AB Foods’ (ABF.L) Primark unit and online retailers including Amazon (AMZN.O) also eroded its margins.

Last week, store group Debenhams (DEB.L) slashed its annual profit forecast after it cut prices to drive sales during Christmas, amid a decline in demand for clothing and pressure on consumer spending.

Mothercare’s troubles have also been compounded by a slowing international business - which runs 1,300 stores across more than 50 countries - mainly due to currency swings and weaker demand from oil-producing countries.

Mothercare’s international retail sales fell 3 percent on constant currency basis for the 12-week period.

However, trading improved in Russia, its largest international market by turnover, as the weather became colder.

Reporting by Rahul B in Bengaluru; Editing by Gopakumar Warrier

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