Mothercare has attempted to reassure investors that it will not be the next big retail casualty after the collapse of Toys R Us and Maplin spooked shareholders earlier this week.
The child and parenting products chain insisted it is still generating cash and that performance remains ‘in line with expectations,’ in a statement issued to markets this afternoon.
It follows speculation that the company could be the next retailer to shut up shop after a number of household names folded earlier this week – rumours that wiped some £6million off the value of the company.
The child and parenting chain insisted it was still generating cash and that performance remained ‘in line’ with expectations
The chain has suffered a significant share prices falls over the last three years and is now far below its peak valuation of £503million.
Disappointing Christmas sales forced Mothercare to cut profit expectations in January. The chain has 1,131 shops, of which 152 are in the UK. Around 40 to 60 of these shops are reportedly up for the chop.
But boss Mark Newton-Jones said he believes the company has the support it needs to continue and become a global retailer.
‘The retail sector continues to face a number of pressures that are clearly having a profound impact on the sector as a whole.
‘Against this backdrop we are performing in line with our expectations and remain a cash generative business, but we also need to push ahead with our transformation strategy to meet our customers’ needs and continue adapting to evolving shopping habits around the world,’ he said.
Net debt at the end of the year is expected to better than the £50million previously estimated, it said, with group profits expected to fall at the lower end of the guidance range between £1million and £5million for the year.
However, the group admitted borrowing was set to increase and that it would ‘require waivers of certain financial covenants’ – meaning it will not be able to meet some of the requirements it had previously agreed with its lenders.
‘We are also exploring additional sources of financing to support and maintain the momentum of our transformation programme,’ it added.
In an effort to keep shareholders sweet, Newton-Jones added: ‘The support already being shown gives us confidence that, despite the challenges, there remains a clear way forward for Mothercare to realise its ambition to be the leading global retailer for parents and young children.’
The statement did little to immediately appease markets, with shares in Mothercare falling 16 per cent on Friday.
The share price dropped from 23p before the announcement to 20p shortly afterwards, far below the 130p level seen last May.
Carpetright has also been hit by the same speculation after issuing its first warning in December after revealing that profits were all but wiped out in the 26 weeks to October 28, falling 93 per cent to just £300,000.
This week a Carpetright update revealed ales growth remained negative at its UK business and was likely to remain below expectations. It is in talks with lenders to assure them it can meet their terms.
Analysts at Peel Hunt are preparing for Carpetright to rack up losses of £4.3million