Mothercare surges on latest market update

<p>Shares of Mothercare have soared (up 20% at time of writing) on the back of the company’s fourth quarter trading update. Mothercare reported a 0.3% […]</p>

Shares of Mothercare have soared (up 20% at time of writing) on the back of the company’s fourth quarter trading update.

Mothercare reported a 0.3% drop in UK like-for-like (LFL) sales for the 12 weeks to 29th March. Total UK sales for the period declined 4%.

The company’s international retail sales grew 9.8% (in constant currencies) during the period. However, taking into account adverse currency impact, Mothercare’s international retail sales declined 1.8%.

The numbers are hardly impressive, but they could’ve been worse

Indeed, the mother and baby products retailer has had a bit of a rough time of late. In January, for instance, the company issued a profit warning following something of a bumpy Christmas.

In the 12 weeks ended 4th January, Mothercare posted a 4% decline in UK LFL sales, with total UK sales dropping some 10% – the company attributed this to “weaker footfall”.

Meanwhile, margins took a knock as a result of higher promotional activity during the period, all of which prompted the company to announce that its full-year profits would likely be below market expectations.

Mothercare’s shares have certainly suffered

Prior to today’s surge, Mothercare had seen more than 60% wiped off its stock this year alone, partly down to that update in January, which saw the company plummet around 30% on the day.

The resignation of the company’s CEO, Simon Calver, who was at the helm of trying to restructure the company, was announced a month later.

Amid declining sales and persistent losses in its UK business over the last few years, Mothercare embarked on efforts to “reshape” the business. That included closing down loss-making stores in the UK and improving products, together with investing in ramping up its online presence.

So, the latest news detailing slight improvement seems promising – but make no mistake, Mothercare still has a long way to go.

The competition hasn’t gone anywhere, further promotional activity in a bid to boost sales is not beyond the realms of possibility and its effect on profitability goes with saying.

Meanwhile, it’s worth noting that, as at November last year, the company’s debt levels were on the rise.

The market’s positive reaction today is understandable, but one swallow does not a summer make.

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