Mothercare PLC (LON:MTC) shares fell on Thursday as the firm reported an 8.8% drop in UK like-for-like sales in the fourth quarter but said it expects to meet full-year estimates as it shuts stores to save costs in a tough market.
The parent and baby retailer pointed out that the decline in UK sales was better than the 11.4% drop reported in the third quarter.
READ: Mothercare to sell baby toy chain Early Learning Centre for £13.5mln as it looks to cut debt
However, the improvement reflected clearance sales in stores that were closing, which squeezed margins.
International retail sales fell 4.9% at constant exchange rates, largely due to challenging trading in the Middle East. At actual exchange rates, international sales fell 4.5%.
In the third quarter, international retail sales fell 1.1% at constant currency and 3.2% at actual currency.
Mothercare expects to meet its full-year forecasts on the back of at least £19mln in annualised cost savings achieved from closing stores.
The company said it has completed its UK stores closure programme ahead of schedule, shutting 40 stores in the past three months. There are now just 80 stores in the UK, down from 137 last year.
CVA agreed last year
Mothercare agreed to a company voluntary arrangement with creditors last year after struggling against tough competition from online retailers and supermarkets.
A CVA is a restructuring that allows a company to shut loss-making stores and reduce rents.
In a note to clients, analysts at ‘house’ broker finnCap said: “The key message from MTC’s pre-close FY19 trading update is that financial performance is on track.”
They added: “MTC has come a very long way in just under 12 months. However, there is much work still to be done over the next 6-9 months, particularly with the UK business, before MTC can be considered to be moving beyond this distinctive turnaround phase of its longer-term transformational journey. So far, so good, we think.”
finnCap maintained a 23p price target on Mothercare shares, which in afternoon trading were down 3.4% at 21.60p.
-- Adds analyst comment, share price --