Mothercare to close a quarter of its UK stores as profits slump

Around 80 stores will be exited when their leases expire in the next two years and will pay £5m to close an additional 30 stores which do not have a lease expiry.

By March 2013 the maternity retailer will have reduced its UK stores from 373 to 266, of which 102 will be out-of-town larger Parenting Centres and 164 in-town.

The move will reduce total occupancy costs, which comprise rent, rates and service by £18m per year and will add £4m to £5m to profits according to the retailer..

Mothercare chief executive Ben Gordon said:  “We are announcing plans to accelerate our UK property strategy and transform the store portfolio over the next two years, benefiting from the unique position of having over 40% of our high street leases expiring by March 2013.

“This will substantially reduce our exposure to the UK high street, further reduce operational leverage and allow us to focus on out-of-town Parenting Centres, direct and our new wholesale business.”

To offset the reduced store numbers the maternity retailer plans to grow its wholesale and online business.

The retailer is also trialling new store formats for both Mothercare and Early Learning Centre over the next few months which have enhanced displays, signage, improved store layout and better positioning of Early Learning Centre within Mothercare stores.

The trial has already started and will be expanded over the next few months.

Full year group underlying profit was down 23.4% to £28.5m despite sales rising by 3.6% to £793.6m and network sales leaping 7.1% to £1.16bn. Excluding exceptional items and currency adjustments, pre-tax profit collapsed from £32.5m to £8.8m.

Mothercare’s UK like-for-likes were down 4% in its year ending March 26. Total UK sales in the year were down 0.5% at £587.2m with its online sales up 10.5% to £82.9m and wholesale business up 350% to £21.6m.