Mothercare's UK business continues to contract

Mothercare yesterday insisted that plans to downsize its UK business were on track as dreary domestic sales took the shine off double-digit growth overseas.

The baby products and clothing retailer, which has issued two profit warnings this year and in May outlined plans to close more than a quarter of its UK stores, said sales at UK stores open more than a year fell 4.3 per cent in the 15 weeks to 9 July. It compares with a fall of 2.4 per cent in the preceding quarter.

Chairman Ian Peacock described UK trading conditions as "difficult and competitive" but added that the plan to focus on a more profitable portfolio of 266 UK stores by March 2013 was progressing well.

The overhaul will result in the closure of 110 high street outlets as the group focuses on out-of-town "parenting centres", which contain its Early Learning Centre brand.

"The new store format trials have been well received by customers and the development of our new Mothercare web platform is on track," Peacock added.

Mothercare has offset the sales downturn in the UK with rapid expansion overseas. International sales grew by 18.2 per cent at constant exchange rates in the 15 weeks to 9 July.

The company, which has 1,289 stores in 55 countries, opened its 900th overseas shop during the last quarter.

Analysts yesterday warned that a continuation of the weak UK performance would lead to downgraded profit forecasts.

Keith Bowman, an equity analyst at Hargreaves Lansdown Stockbrokers, said: "The downsizing of the group's UK operations can't come fast enough for investors.

"The fall in same-store UK sales continues to accelerate, with the profit margin likely to have remained under intense pressure."