Retailers to reveal plans for fight back

Simon Calver: Mothercare chief executive took over in April 2012. Picture: Mike Ellis
Simon Calver: Mothercare chief executive took over in April 2012. Picture: Mike Ellis
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TWO of the high street’s best-known names will this week update investors on their turnaround plans as Mothercare and Thorntons fight back against the squeeze on consumer spending.

Further store closures could be on the cards at Mothercare, following on from the raft of loss-making outlets that have already been jettisoned under its three-year restructuring plan.

Former Lovefilm chief executive Simon Calver took over as Mothercare boss in April 2012 after chairman Alan Parker removed incumbent Ben Gordon in October 2011 following a profit warning.

Under its recovery plan, Mothercare closed 56 stores in the year to 31 March – reducing its footprint by 7.2 per cent – to leave it with 196 Mothercare outlets and 59 Early Learning Centre stores.

The company is now working towards a revised plan that will give it a 200-strong estate by 2015, allowing it to focus on its growing international business.

The cost of the closures drove it to £21.7 million in underlying full-year UK losses, although the group said it is on track for a return to profitability in Britain.

The group has more than 1,300 stores in 61 countries, with nearly 60 per cent of its sales generated overseas.

It hopes to boost its international expansion, after adding 2.8 per cent more space abroad during the year.

Surging international earnings helped the group to improved underlying annual profits of £8.3m.

Matthew Taylor, analyst at Numis Securities, said Mothercare is likely to report “continued steady progress along the recovery path” at Thursday’s annual general meeting.

He said: “The store closure programme should be confirmed as being on track or ahead of the initial plan.

“We forecast continuing underlying sales growth of about 15 per cent in the international operation, bolstered by new store openings and like-for-like growth.

“We have remained firm backers of the shares during the first phase of the new team’s recovery strategy.”

Meanwhile, chocolate retailer Thorntons is due to reveal further details of its trading revival tomorrow as its turnaround gathers pace.

The group’s final-quarter update comes after it confirmed earlier this month that full-year profits will beat expectations thanks to a sales recovery and careful cost management.

It first upped profits guidance in April after a successful Easter, when it grew its market share to 4.7 per cent from 4 per cent a year earlier, with Thorntons-branded UK commercial sales growing by 10 per cent to £27.4m.

The group has revived its business with an increased focus on commercial channels, such as the sale of chocolate boxes through supermarkets.

The group’s turnaround has also involved shrinking its store footprint to a core estate of 180 to 200 sites.

Bethany Hocking, retail analyst at Investec Securities, said the final quarter was set to be a “good end to a good year”, adding it was “clearly good news” that the company had raised City expectations twice in three months.

The chain’s overhaul, spearheaded by chief executive Jonathan Hart, follows a series of profits warnings in 2011 when the chocolatier was hit by the consumer spending squeeze.