Mothercare hit by tough Middle East trading

(Sharecast News) - Mothercare reported a rise in first-half profit on Friday, but sales fell due to pressures in the the Middle East. In the 26 weeks to 23 September, adjusted earnings before interest, tax, depreciation and amortisation rose 12% to £3.6m, reflecting tighter cost control, while adjusted pre-tax profit was up 17% at £3.4m.

Revenue fell to £29m from £38.5m in the same period a year earlier, however, with international retail sales by franchise partners down 15% at £137.2m. Mothercare said this reflects difficult trading conditions in the Middle East, where sales are down 20% on last year.

The retailer said its franchise partners' international retail sales were impacted by continuing global economic uncertainty and the need for them to clear old inventory.

It said its performance in the Middle East, especially the Kingdom of Saudi Arabia, "remains challenging", having undergone significant changes in recent years.

"Fiscal and legislative changes and the introduction of many new leisure activities competing for consumers' money is changing consumer behaviour," Mothercare said. "The shape of our partner's retail offering in the country is evolving and we remain confident of the longer-term market opportunity."

The retailer said it was "acutely aware" of the ongoing pressure on its franchise partners' profitability and the consequent need for them to cut costs and investment levels.

"This will likely lead to further reductions in our store footprint in some regions," it said. "We are working closely with our key partners to assist them with their recovery, ultimately benefitting both our own business and our franchise partners' businesses when we eventually return to pre pandemic levels of trading."