Mothercare has warned that its full-year losses are likely to be in line with its previous financial year’s as it kicks off talks to sell struggling UK stores.

The specialist retailer said it had revised its pre-tax profit expectations as it predicts that “the UK market will continue to be uncertain and volatile” in the medium term, resulting in a need for higher-than-anticipated promotional activity.

The struggling retailer, which recorded a 23.2% decline in UK sales in the 15 weeks to July 13 exacerbated by last year’s CVA, has said that it plans to create “the optimal structure for UK retail operations as an independent Mothercare UK franchise”.

In like-for-like terms the rate of decline in sales slowed to 3.2% bolstered by discounting, but boss Mark Newton-Jones said the retailer had “observed a lower-than-expected transfer of sales following the CVA store closure programme which completed in early April 2019”.

The retailer currently operates a UK estate of 79 stores, down from 134 prior to its CVA last April.

International retail sales declined 4.5% during the period on a constant currency basis, driven by declines in the Middle East.

Newton-Jones said: “The UK retail market remains challenging and though the rate of decline in LFL sales has moderated, margin investment in promotional activity has been necessary to stimulate sales, both in our stores and online. The impact of this has negated much of the margin benefits we had expected to materialise.

“International performance has been mixed with good progress in our growth markets of Russia, India and Indonesia offset by macro and micro challenges in the key markets across the Middle East. We have recently presented the newly designed global product range and the global brand marketing campaign to our franchise partners, both of which have received a positive response.

“The process of restructuring and rebuilding a sustainable business continues, and we have in place financing plans to support these actions as we aim to be bank-debt-free by the end of the year. Our immediate priority is to complete the transformation of the business with a near-term focus on evolving and optimising the ownership, structure and model for our UK retail operations as an independent franchise.” 

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