Tibbett & Britten new warehouse fails to deliver -Mothercare issues profits warning
The prospects of a swift recovery at Mothercare came to an abrupt halt yesterday when the company warned it had serious problems at its new warehouse which would hit full-year profits.
The mother and baby retail specialist, which has been rebuilding its image and its share price this year, said its stores were running short of stock because of the warehouse hold-ups, and that was being reflected in lost sales.
Mothercare was reporting a 20% jump in half-year profits before one-off costs to pounds 4.8m. The half-year period covered 28 weeks to the middle of October. Like-for-like sales – which exclude the impact of changing shopfloor space – were ahead 5.6%.
In August the group opened a pounds 10m warehouse in Northamptonshire – which it was forced to build after separating from Bhs – and in the first four weeks of the second half like-for-like UK sales were down 4.5%. Total sales were down 7.6%, as the group was forced to halt international shipments of stock to prioritise deliveries to British stores.
The warehouse is operated by Tibbett & Britten, which has a five-year contract.
Mothercare chief executive Chris Martin first flagged the problems at the warehouse last month, but yesterday he said: “We are very disappointed that the problems at the warehouse will take longer to resolve than initially anticipated. The impact of this means pre-exceptional profits this year will be lower than expectations.”
A one-off charge of pounds 4m has been taken to cover the extra costs of getting stock to stores, such as extra warehousing and organising deliveries to shops direct from suppliers.
The shares closed down 15.5p to 215p, although at one stage they had been changing hands at 180p. In the summer they reached 336p as the recovery gathered momentum. At that time they were among the best performing UK retail stocks, but they started to lose ground in September, when the market first sensed problems.
Mr Martin has closed stores and concentrated on the larger Mothercare World outlets. The group has also improved its baby and toddler clothing ranges and its home, travel and toy products. Gross margin was up 2.1%.
Richard Ratner, analyst at Seymour Pierce, said: “Fundamentally the business is sound, but they have gained a credibility problem. Tibbett & Britten have a lot to answer for.” He has cut his full-year profit forecast from pounds 16m to pounds 11m and his 2002 forecast from pounds 21m to pounds 19.5m, but said current share price weakness would be a good buying opportunity. Analysts at broker Teather & Greenwood have changed their recommendation from hold to sell.
Mr Martin said he hoped the warehouse problems would be resolved by January. “It has knocked back our recovery programme by about six months. It is extremely disappointing considering the improvements we’ve made in products and our service elsewhere.”
He refused to pin all the blame on Tibbett & Britten but said Mothercare would raise the issue of compensation once the full costs of the problem had been calculated.
He added: “I’m sure once we have this resolved we’ll be in good shape.”
The Guardian
