December 7, 2022

Mothercare’s profits tank as decision to leave Russia costs retailer millions in sales

Mothercare names new CEO as retailer’s profits tank by almost 90% after Russia exit costs millions in sales

  • The maternity products retailer has slumped to a £0.4m half-year profit
  • Russia previously provided 20 to 25% of Mothercare’s global retail sales
  • Daniel Le Vesconte has been announced as the firm’s next chief executive 

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Mothercare has narrowly avoided a loss after taking a significant hit from exiting the Russian market in the aftermath of the invasion of Ukraine.

The maternity products retailer slumped to a £0.4million profit in the six months ending 24 September, against £3.6million in the equivalent period last year.

Mothercare’s decision to suspend all operations in Russia in early March was significant, given that the country provided 20 to 25 per cent of global retail sales.

Earnings: Maternity products retailer Mothercare slumped to a £0.4million profit in the six months ending 24 September, against £3.6million in the equivalent period last year

When discounting the impact caused by the lost sales from this market, worldwide retail orders by the group’s franchise partners increased by 15 per cent, thanks partly to a stronger performance at British high street giant Boots. 

Instead, total revenues declined by 12 per cent to £162.1million over the period, while online orders plummeted by around a quarter to £13.1million.

Outside of Russia and the UK, Mothercare noted a ‘more challenging’ market in the Middle East, especially in the United Arab Emirates and Saudi Arabia.

Within the latter territory, the company blamed weak demand on a new sales tax, laws mandating employers to hire more Saudis in their workforce and loosening restrictions on social activities. 

Chairman Clive Whiley said: ‘Our immediate priority now remains to support our franchise partners as we together navigate out of this suppressed demand period, recover from supply chain disruptions and rebuild their store footfall whilst growing their digital sales.

‘This inevitably means that a return to pre-pandemic levels of trading is taking time; however, this will ultimately benefit both our own business and our franchise partners’ businesses in the longer term.’

Mothercare also announced that Daniel Le Vesconte would become its next chief executive, making him the first person to hold the position since Mark Newton-Jones left in 2020, just days after the group closed all its UK stores.

Le Vesconte recently finished a three-year tenure overseeing the Abercrombie and Fitch set of brands, which include Hollister and Gilly Hicks, across Europe, the Middle East and Asia.

Prior to that, he held similar posts at footwear manufacturers Dr Martens and Wolverine Worldwide and also occupied senior positions at skateboarding apparel seller Vans. 

Revealing the appointment, Whiley said Le Vesconte’s ‘extensive experience in the retail direct-to-consumer, wholesale and licensing sector will be a great asset to the team and me as we focus upon restoring critical mass and driving the Mothercare brand globally’.

The Watford-based firm has endured a torrid few years, culminating in its UK division falling into administration in 2019 in the face of hefty competition from supermarket chains and mounting losses.

All the group’s British outlets were shut, with the loss of 2,500 jobs, yet the group’s international operations have done comparatively better, with sales in India and Malaysia now ahead of their pre-pandemic levels. 

It admitted that inflation and consumer uncertainty will impact its trading for the time being but said demographic trends and an increased focus on customer value will ‘provide a degree of insulation in these uncertain times.’ 

Mothercare shares remained flat at 6.6p on Thursday morning. 

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