Mothercare plc Issues Profit Warning

The shares of Mothercare (LSE: MTC) dived 132p, or 32%, to 287p during early trade this morning after the retailer issued a full-year profit warning.

Mothercare, which operates 237 stores across the UK, said turnover and margins had been hurt by “the highly promotional nature of the Christmas period and lower seasonal footfall“.

During the 12 weeks to January 4th, UK like-for-like sales fell by 4% while total sales fell by 10% following several shop closures.

The group’s international operations recorded sales up 0.4% during the 12-week period, with currency movements, unseasonal weather and weaker-than-expected economic conditions hitting progress overseas.

Simon Calver, the chief executive of Mothercare, said:

Difficult UK retail trading conditions and volatility in some of our International markets resulted in weaker than expected worldwide network sales this quarter.

As a result… full-year profits are likely to be below the current range of market expectations. We continue to focus on delivering a turnaround in the UK and exploiting the global growth opportunities for Mothercare.

Prior to today, City experts were forecasting Mothercare’s results for the year to March 2014 would show earnings of 15p per share and a dividend of 2p per share.

Following this morning’s price movement, Mothercare’s P/E may still be close to 20 — which would appear very rich given today’s warning.

Of course, whether the share-price reaction as well as the wider prospects for selling prams and pushchairs both combine to make Mothercare a 'buy' or a 'sell' right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.