Mothercare shares rose on Friday as a sales slowdown in its key Middle East market was overshadowed healthy profit growth in the first half.
The retailer, which now operates a franchise model after shuttering UK stores in 2019, saw a 17 per cent increase in adjusted pre-tax profit to £3.4million in the 26 weeks to 23 September.
But international retail sales by franchise partners were down by 15 per cent year-to-year to £137.2million, with the Watford-based firm pinning the lame on difficult trading conditions in the Middle East, where sales sank 20 per cent.
The Watford-based firm said a decline in international retail sales reflected difficult trading conditions in the Middle East which is down 20 per cent on last year
Mothercare shares are up by 10.64 per cent to 5.20p in morning trading on Friday.
Revenue was down to £29million to £38.5million over the same time period a year earlier.
The firm attributed solid profit growth to ‘tighter control of costs’.
Clive Whiley, chairman of Mothercare, said: ‘These results are testament to our continued drive to preserve the strength of the Mothercare brand in a fast changing retail and macroeconomic trading environment.
‘Against significant headwinds in the Middle East, one of our core markets, we are pleased that our business model and disciplined approach to cost has resulted in an increase in profitability for the first half.’
The group has endured a torrid few years, culminating in its UK division entering administration in 2019 amid mounting losses and fierce competition from supermarket chains.
It is now run as a franchise business. In the UK, it sells its goods such as baby clothes, toys and bedding through Boots.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: ‘Mothercare is in need of some self-care, after warning more of its franchise stores could close.
‘Tough trading conditions, especially in the Middle East, are causing problems for a company that’s already had to peddle extremely hard to stay afloat.
‘An area that needs a laser-like focus from management is the net debt pile, which stands at many times the amount of the group’s cash profits. There’s also a sizeable pension deficit to clear.
‘For now, profits are being supported by deep cost cuts, but these can only go on for so long and won’t be enough in the long run.’
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