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Mothercare and Clinton Cards issue profit warnings | Mothercare and Clinton Cards issue profit warnings |
(about 2 hours later) | |
Mothercare has issued a profit warning after the winter weather hit its business. | Mothercare has issued a profit warning after the winter weather hit its business. |
Like-for-like sales in the last three months of 2010 fell 5.8% as the freezing conditions caused "widespread disruption". | Like-for-like sales in the last three months of 2010 fell 5.8% as the freezing conditions caused "widespread disruption". |
Toy sales were hardest hit after the firm cut off Christmas online orders early to ensure delivery. | Toy sales were hardest hit after the firm cut off Christmas online orders early to ensure delivery. |
Meanwhile Clinton Cards said the weather had seen sales fall 2.1% in the last five weeks of the year. | Meanwhile Clinton Cards said the weather had seen sales fall 2.1% in the last five weeks of the year. |
It said "the impact of such adverse weather conditions" was "disappointing" and that full year profits would be "significantly lower" than market expectations. | It said "the impact of such adverse weather conditions" was "disappointing" and that full year profits would be "significantly lower" than market expectations. |
However, href="http://www.majestic.co.uk/About/Investors/News/News110106" >there was better news from Majestic Wine, which thanked "loyal customers for battling through December's dreadful weather conditions" as it saw UK like-for-like sales growth - which strips out the impact of new stores - of 3.7% in the nine weeks to 3 January. | |
Meanwhile, separate data from the Markit/CIPS Purchasing Managers' Index (PMI) suggested that snow had played a part in causing the UK's service sector to slow for the first time in 20 months in December. | |
Weather 'victims' | Weather 'victims' |
href="http://www.mothercareplc.com/news-item?item=573650864446158" >Mothercare said that the poor weather had reduced UK like-for-like sales in the third quarter by about 4%, and that its out-of-town shopping centres had particularly suffered from the disruption. | |
And it warned that annual gross profits from the UK would be lower than the £41m previously stated, adding that the consumer environment remained "difficult". | And it warned that annual gross profits from the UK would be lower than the £41m previously stated, adding that the consumer environment remained "difficult". |
However, the firm has continued to see strong growth in its international business where sales grew by 17.6% between September and January compared with same period a year earlier. | However, the firm has continued to see strong growth in its international business where sales grew by 17.6% between September and January compared with same period a year earlier. |
"Despite growing international sales, an already challenged UK business now forms another victim of the cold weather," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers. | "Despite growing international sales, an already challenged UK business now forms another victim of the cold weather," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers. |
"The group's shift towards out-of-town premises appears to have worked against it, whilst like rival Next, the fragilities of time critical direct online Christmas sales have been exposed." | "The group's shift towards out-of-town premises appears to have worked against it, whilst like rival Next, the fragilities of time critical direct online Christmas sales have been exposed." |
Earlier this week, Next said the December snow had cost it £22m in Christmas sales, but that profits remained on target. | Earlier this week, Next said the December snow had cost it £22m in Christmas sales, but that profits remained on target. |
And HMV blamed the bad weather as well as "challenging trading conditions" for a 10% fall in festive sales, and warned profits would be at the lower end of forecasts. | And HMV blamed the bad weather as well as "challenging trading conditions" for a 10% fall in festive sales, and warned profits would be at the lower end of forecasts. |
'Concern' | |
Public spending cuts and the arctic conditions were seen as factors in the slowing of the service sector, according to the Markit/CIPS Purchasing Managers' Index (PMI) survey. | |
Its reading slipped to 49.7 in December from 53 in November. A reading below 50 indicates contraction. | |
Hotels, restaurants, caterers and personal services faced most disruption, the report said. | |
The data "posed a genuine cause for concern" according to Nida Ali, economic adviser to the Ernst & Young ITEM Club. | |
"Temporary factors such as poor weather conditions may well be the reason for such a drastic fall... however underlying trends such as a fall in employment for the third consecutive month imply that the services sector overall remains weak," she said. | |
Earlier this week, PMI figures for the manufacturing sector indicated it had enjoyed the strongest growth in 16 years in December. | |
"There is a strong indication that UK economic growth is completely reliant upon export sales while domestic demand has wilted," said Markit's chief economist, Chris Williamson. |