Mothercare keeps kids (and shareholders) happy

16th Jul 2009 14:46

Parents are struggling to pay the bills and hang onto their jobs, but bumper sales at children's retailer Mothercare suggest the kids are blissfully unaware that Britain is toughing out the deepest recession in decades.Sales were up 9.4% in the first quarter and rose by 5.1% in the UK on a like-for-like basis, better than the full year figures that had sales in the 12 months ended 28 March up 7% and 1.4% like for like.Once again it's Early Learning Centre (ELC) that's been a major driver. Bought in 2007 from Chelsea Stores Holdings, the books and toys stores have been placed within 84 larger Mothercare outlets, each benefiting from increased footfall. Chief executive Ben Gordon told shareholders in May that ELC has delivered benefits "beyond expectations".They also seem to like the British firm's brands overseas. International sales grew almost 33% in the 15 weeks ended 10 July thanks to the weak pound and 30 new stores opened in regions such as Eastern Europe and the Middle East. Mothercare now has 639 overseas stores in 50 countries and wants to open another 100 this year, 10 of which will be in Russia, taking the number there to 47. Russia is the biggest contributor to international sales for Mothercare, accounting for about 20% of trading profit.Broker Seymour Pierce points out that Mothercare has been the only General Retail stock to have risen over the last two years during which the sector has been "severely derated". The shares are as high as they've ever been, doubling since last October and nearly 50% better than they were just a few months ago. But many analysts think there could be more to come as mums and dads shield their little darlings from the downturn.There's also the continuing revenue stream to remember. Children keep growing until they're old enough to pay for their own clothes, but until then parents have to continually buy new outfits to keep up with their growing offspring.Even the recession has been good for Mothercare. Weaker competitors, including Woolworths, which sold a wide range of children's clothes and toys, have gone to the wall, leaving many town centres with no alternative. A number of popular internet sites that tried to compete on price have also disappeared. Mothercare has just completed its 16th quarter of UK like-for-like sales growth, and with parents desperate not to upset the kids, who'd bet against them making it 17 in October.