StockMarketWire.com - Mothercare revealed UK like-for-like sales declined 8.8% in the quarter to 30 March 2019, representing an improvement on the prior two quarters.

The company said improved UK sales were driven by clearance stock volumes in closure stores which diluted gross margins but cleared all inventory in these stores.

This clearance activity significantly impacted online full price sales as volumes switched to closing stores.

PROGRESS WITH STRATEGIC TRANSFORMATION

As part of our ongoing transformation plan, Mothercare achieved the following over the quarter:

- On 12 March announced the sale of the Early Learning Centre to The Entertainer for £13.5m, enabling a further reduction in bank debt and a focus on our core strategic priorities

- Concluded the changes necessary to create a leaner organisational structure and the establishment of three new internal divisions; Mothercare Global Brand, Mothercare UK and Business Services

- Successfully completed the UK store closure programme ahead of schedule, closing 40 stores in the past three months. UK estate of 80 stores at 3 April 2019, down from 137 in the prior year, represented a reduction in space of 30%

- On track to deliver at least £19m of annualised cost savings

- Full-year performance remains unchanged and in line with previous guidance

INTERNATIONAL

- International retail sales down 4.9% in constant currency; down 4.5% in actual currency

- Retail sales in core markets down 5.7% in constant currency driven primarily by economic and trading challenges in the Middle East. Growth in the quarter was observed in core markets of Russia, India and Indonesia

- Retail space at the end of the quarter of 3m square feet with 1,227 stores

Mothercare chief executive officer Mark Newton-Jones said: "We have continued to make significant progress in our final quarter as we continue our strategic transformation to deliver a sustainable and profitable future for Mothercare.

"The UK store closure programme has been completed ahead of schedule and we now have 80 stores in operation, down from 137 stores a year ago.

"Whilst this has been a difficult but necessary process, to right-size the UK, it has meant that we have had to say goodbye to many loyal and longstanding colleagues.

"We continue to manage our cash tightly and we have further reduced the levels of debt as part of our aspiration to be bank debt free by the end of 2019.

"Reduction in debt has also been aided by the sale of Early Learning Centre, which was another strategic milestone for Mothercare and gives us a new UK concession arrangement for our toy category with The Entertainer, who will bring our customers a broader and stronger product offer.

"The disruption we have seen from both the organisational changes and the UK store closures is now largely behind us.

"We expect a continued impact on our business given the volume of clearance stock we have sold in recent months.

"Against this background, we remain on track to deliver on our full year expectations.

"Looking ahead, we expect market conditions in the UK and in some international markets to remain challenging.

"We enter the new financial year in a more robust position as a restructured business fit for the future and with reduced levels of debt.

"We have a significantly smaller UK store estate and our international operations remain cash generative."



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