Mother and baby products retailer Mothercare said it saw a significant opportunity to develop a global wholesale business as a fourth channel to market as it posted an 11 percent increase in first-half profit. The firm, which trades from 389 UK stores, 694, mainly franchised, international stores, and has an on-line business, also hiked its interim dividend by 19.6 percent on Wednesday and said it was confident about prospects for the second half.
"While this (wholesale) is a relatively small business within the group, with annual sales of about 10 million pounds, we believe it has the potential to be a significant growth stream for the future, particularly in countries where we don't have a store presence," Chief Executive Ben Gordon told reporters. He declined to say how big a business he thought global sales to third-party retailers could become.
Shares in Mothercare have more than doubled over the last year, outperforming the UK general retail index by 12 percent. The stock was up 1.4 percent at 634 pence at 10:14 a.m., valuing the business at 559 million pounds. "Given the very strong performance year to date, there may well be some profit taking ahead of Christmas," said analysts at joint house broker Cazenove. Britain's retailers have been struggling in the recession and although there have been signs recently that a recovery is underway many remain cautious about prospects for 2010.Mothercare has coped better than most, helped by selling essential products to parents, strong growth in emerging markets, home shopping and the Internet, and the integration of the Early Learning Centre (ELC) brand it bought in 2007.
The firm plans to open a further 33 of its largest format out-of-town parenting centres in the UK by the end of 2011, creating 400 new jobs, and sees scope for 120. The retailer has also identified a further 12 in-town sites where it plans to open new stores.At the same time it wants to rationalise over 90 lower-profit high street stores which have lease expiries over the next three years. These stores will be re-sited, have their rents renegotiated, or closed.
Mothercare forecast its property strategy would deliver 10 million pounds of annual savings by 2012.International franchising remains the major growth engine for the group. It plans to open 115 new stores in the year to end-March 2010, with major expansion planned for India and China and an entry into Australia and South Africa. "We are well placed as we enter the important second half," said Gordon. Mothercare made an underlying pretax profit of 10 million pounds in the 28 weeks to October 10, up from 9 million pounds in the same period last year.
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