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

Mothercare narrowly avoided a loss after taking a major blow from its exit from the Russian market in the wake of the invasion of Ukraine.

The maternity retailer slumped to a profit of £0.4m in the six months ended September 24, down from £3.6m in the same period last year.

Mothercare’s decision to suspend all operations in Russia in early March was significant, as the country accounted for 20 to 25 percent of global retail sales.

Excluding the impact of the loss of sales in this market, global retail orders from the group’s franchise partners were up 15 percent, partly due to a stronger performance at British retail giant Boots.

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

Outside of Russia and the UK, Mothercare identified a “more challenging” market in the Middle East, particularly in the United Arab Emirates and Saudi Arabia.

Within the latter area, the company blames weak demand on a new sales tax, laws requiring employers to hire more Saudis and easing restrictions on social activities.

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

This inevitably means that a return to pre-pandemic levels of trade will take time; however, this will ultimately benefit both our own business and the business of our franchise partners in the longer term.”

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

Le Vesconte recently ended a three-year tenure overseeing Abercrombie and Fitch’s brands, including Hollister and Gilly Hicks, in Europe, the Middle East and Asia.

Prior to that, he held similar positions at shoe manufacturers Dr. Martens and Wolverine Worldwide and also held senior positions at skateboard apparel retailer Vans.

While unveiling the appointment, Whiley said Le Vesconte’s “extensive experience in the retail direct-to-consumer, wholesale and licensing industries will be a great asset to the team and me as we focus on restoring critical mass and promoting the Mothercare brand globally’.

The Watford-based company has endured a torrid few years, culminating in its UK division falling into administration in 2019 due to fierce competition from supermarket chains and mounting losses.

All of the group’s UK operations were closed, with the loss of 2,500 jobs, but the group’s international operations have fared relatively better, with sales in India and Malaysia now above pre-pandemic levels.

It conceded that inflation and consumer uncertainty will impact trade for now, but said demographic trends and a greater focus on customer value will provide “a degree of isolation in these uncertain times.”

Mothercare shares remained flat at 6.6p Thursday morning.