UK Edition
Mothercare warns prices will rise by up to 5pc next year
Baby and toddler retailer Mothercare has become the latest in a string of companies to warn that it will have to push prices up next year following the sterling slump.
Mark Newton-Jones, chief executive, said that he expected to raise shop prices by between 3pc and 5pc as a result of higher import costs. Around half of the brand's UK lines are sourced in non-sterling currencies, and as a result will be more expensive.
Mothercare is protected until May, he explained, because it has already locked in prices through hedging.
"After the vote to leave the European Union, the dollar was up by around 18pc," he said. "We came to an agreement with our suppliers and managed to mitigate against around a third of that increase. We'll take some of the rest through costs, but the bulk of the difference will go to customers."
He added that the business would not be increasing prices before May.
Mothercare today insisted its turnaround is on track despite blaming poor weather over the summer months for stalling sales growth in the last six months.
The company, Britain’s best-known baby goods retailer, is in the second year of a turnaround plan that has seen it refurbish more than 90 of its UK stores, as well as close others, and upgrade its online presence.
But it said overall sales had ground to a halt during a "challenging" six-month period. Group revenue in the six months to October 8 was flat at £347.7m, compared to £349.9m a year ago.
Mothercare swung from a pre-tax profit of £5.8m a year ago to a loss of £800,000, largely due to a one-off cost of £10.7m attributed to its store closure programme, improvements to its warehouses, restructuring parts of its overseas business and an impairment cost for investment in a joint venture in China.
Like-for-like sales in the UK, which strip out stores that have opened or closed in the last year, slipped 0.7pc.
Its international arm, which has more than 1,300 stores in 56 countries, reported a 2.9pc fall in like-for-like sales.
The company returned to profitability last year after five years of losses. In a bid to boost margins, the retailer has introduced more premium lines including ranges by Myleene Klass, Jools Oliver and Julien McDonald, which sell for between 50pc and 100pc than Mothercare's own brand.
It is also looking to build its ecommerce operation. Online sales were up 6.9pc in the period, helped by the brand’s drive to get more customers to shop through its website. Digital sales now account for 40pc of all sales in the UK.
Mr Newton-Jones said despite the difficult trading period, he expected the second half of the year to be in line with the company’s plans. “The business is well prepared for the important peak season,” he said, adding that it maintained its ambition to develop in the UK and overseas.
"While sales are still volatile across the globe, many of our markets have now returned to growth."
Shares in the company tumbled by as much as 8.3pc to 102.25p in morning’s trading.