Mothercare, a leading brand for parents and young children, has released its full-year trading update which highlights both positive developments and obstacles faced by the company. The update reveals that the company’s expansion into new markets and reinvention has resulted in increased worldwide retail sales by franchise partners, reaching £322 million for the year ending on March 25. It’s important to note that this figure doesn’t include sales from the Russian market, which had been suspended the previous year. The company experienced an 8% increase in sales in continuing markets.

In addition, Mothercare has exceeded analysts’ expectations with its full-year adjusted EBITDA expected to be between £6.5 million and £7 million. The company’s net debt at the end of the year was reported as £12.3 million, and its pension scheme deficit has decreased from £124.6 million to £39 million over the past few years.

However, upon closer examination, it becomes apparent that the £322 million in sales is actually lower than the previous year’s figure of £385 million, including £88 million from Russia. Although Mothercare is performing well in some regions, it continues to face challenges in important markets. Sales in the Middle East, which account for 43% of Mothercare’s total retail sales, have declined by 1%. The company attributes this decline to certain temporary local factors. When excluding sales from Russia and the Middle East, the year’s retail sales increase jumps to an impressive 17%.

One ongoing challenge for Mothercare is that its partners in various regions are still working to clear old inventory as a result of suppressed demand during the Covid-19 pandemic. This will continue to affect the company’s results for the financial year ending in March 2024, despite improvements in product and service.

Regarding the adjusted EBITDA figures, Mothercare explained that the previous year’s results included a contribution of £5.5 million from its Russian territory. When excluding this element and considering the margin benefit from shipping delays in the previous year, the company’s underlying profitability has shown year-on-year improvement.

Looking ahead, Mothercare’s medium-term guidance remains unchanged as it focuses on both existing and new markets. The company is aiming to achieve operating profits exceeding £10 million and plans to expand its global presence through diversifying its product range and entering new territories via various channels.

Despite the challenges it faces, Mothercare is making progress overall. Chairman Clive Whiley highlighted the resilience the company has built and its ability to generate profit and cash. While supporting franchise partners remains a priority, Mothercare is determined to regain critical mass and accelerate its growth in current and new markets. Discussions are already underway to achieve this goal by expanding the Mothercare brand globally and exploring different avenues for market penetration.

Useful links:
Mothercare Official Website
BBC News: Mothercare trading boosted by recovery overseas