Mothercare confirms UK restructure

Firm announces full year results and outlines plans for UK business.
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Mothercare has reported its financial results for the year-ended March 26th, 2011. Group sales were up 3.6 per cent to £793.6m, compared to £766.4m in 2010.

Group underlying profit before tax was down 23.4 per cent to £28.5m, compared to £37.2m in 2010.

After much speculation, the retailer also confirmed plans to 'transform the in-town estate within two years'. In order to do this, around 110 in-town store closures and 40 rent reductions by March 2013, benefiting from 120 in-town lease expiries (90 in 2011/12; 30 in 2012/13).

These closures are hoped to reduce occupancy costs by around £18, which will in turn, benefit UK profit by at least £4m-£5m per year from March 2013.

Mothercare also plans to drive the multi-channel business forward. A new ELC website has been launched already and a fresh Mothercare site is planned for 2012.

Furthermore the firm will work to develop wholesale, having already launched a clothing partnership with Boots, wholesale sales for the year were up 350 per cent to £21.6m

Finally, the UK business will benefit from a reduction in costs. A programme is underway to save a further £5m per annum.

Ben Gordon, chief executive, said: "Over the last three years we have been reshaping the UK business for a changing retail landscape by downsizing the in-town property portfolio and growing Direct and Wholesale.

"Today we are announcing plans to accelerate our UK property strategy and transform the store portfolio over the next two years, benefiting from the unique position of having over 40 per cent of our High Street leases expiring by March 2013. This will substantially reduce our exposure to the UK high street, further reduce operational leverage and allow us to focus on out-of-town Parenting Centres, Direct and our new Wholesale business."

The International business, however, has continued to grow, with total international sales up 16.3 per cent to £570.9m. 166 new International stores were opened, taking the total to 894 in 54 countries.

Asia-Pacific sales rose by a massive 47 per cent with rapid growth in Australia, China and India.

The retailer also announced plans to enter Latin America in 2011 with franchise stores in Colombia and Panama. Furthermore, a roll out of overseas websites has commenced.

Gordon continued: "International has had another record year with total International sales up 16.3% and the business continues to go from strength to strength. We are on track to meet the International growth targets set out in December and we are announcing today plans to enter Latin America for the first time later this year.

"In the new financial year, we expect International to continue to grow retail sales at 15-20 per cent with 150 new store openings. We expect the environment to remain challenging in the UK, although we will benefit from continued growth in wholesale and direct together with the acceleration of our property strategy.

"Given the group's strong underlying operating cashflow, particularly from International, we are proposing a full year dividend of 18.3p, an increase of 8.9 per cent."


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