Mothercare margins squeezed as shoppers cut back

31st Mar 2011 07:02

Babycare retailer Mothercare saw margins squeezed in the quarter to 26 March after slashing prices to clear its autumn and winter stock amid a weak consumer environment.Total sales were up by 10.2% from the same period the previous year, with international operations leading the way. Sales in Britain were up by 4.7%, though they were down by 2.4% on a like-for-like basis, which excludes the wholesale business.The stock clearing measures Mothercare had to implement mean that gross margins for its British operations will be 2.5%, down 0.5 percentage points from previous guidance. Mothercare closed 26 high street stores over the full year, but opened 12 "parenting centres".The company said its international business saw particularly strong growth in the Asia-Pacific region, which includes joint ventures in India, China and Australia. Mothercare has 1,267 stores in 55 countries with 373 in the UK and 894 overseas including 62 in India."In the UK we expect the consumer environment will be challenging and accordingly, we are planning cautiously," Mothercare said. "We will benefit from continued progress in wholesale however we expect the profitability of the UK retail operations to remain under significant pressure in 2011/12 with weak demand continuing, although input cost pressures on gross margin will be offset by cost savings."Mothercare is the latest big name on the high street to complain of tough conditions. Yesterday, the electrical specialist Dixons Retail, which owns Currys and PC World, issued a profit warning.RG