Baby clothing and equipment group Mothercare signalled it was beginning to bounce back today after seeing sales growth return to the business.
The retail group added it was ready to put last year’s Christmas nightmare behind it this time round, after improvements were made to its supply chain.
A year ago, teething problems at Mothercare’s warehouse in Daventry meant stores ran out of products over the crucial festive period.
But today Mark McMenemy, acting chief executive, said while warehousing and distribution costs were still too high, the supply issue had improved.
And like-for-like sales were up 1.4% in the five weeks to last Thursday after falling by 2.1% in the first half year, the six months to 12 October.
McMenemy said: “After a very difficult period for the business, the sales picture is now positive and the stores well stocked for Christmas.”
Mothercare warned it would fall into the red over the first half when chief executive Chris Martin stepped down four months ago.
It said anticipated improvements in sales since the start of the year had not been seen while markdowns to clear excess stocks had hit margins.
Results today showed pre-tax losses in the six month period came in at £10m, against profits a year ago before one-off costs of £4.8m.
McMenemy said margins were now improving as promotional activity was cut back and a greater proportion of product sold at full price.
He added however warehousing and distribution costs continued to be a “major impediment” on Mothercare’s recovery drive.
A push to restore service levels in the supply chain saw warehousing costs soar to £18.3m in the first half, almost double a year ago.
The group said that despite a number of initiatives with Tibbet & Britten, the group that runs the Daventry site, costs were still an “unacceptable” 8% of sales.
Several options were now being considered while Daventry would continue to be supported by a site in Coventry, now being retained until March 2004.
Sales overseas in the first half improved 29.5% to £24.7m with most of the group’s franchises reporting a rise, particularly in the Middle East.
Mothercare’s catalogue and website business Direct notched up an 11% rise to £8.1m and total group turnover rose £1.8m to £228m.
EGi News 21/11/02
