Mothercare prepares to shake up direct sourcing

Maternity retailer Mothercare aims to increase direct sourcing to 50 per cent, in an effort to boost margins and improve its product.

The chain has already upped direct sourcing to 30 per cent in the year to March 27, against 10 per cent two years ago. Chief executive Ben Gordon said effective sourcing was fundamental to providing 'good-quality, good-value product', as well as lowering costs.

Operating margins widened by 5.9 per cent in the year as a result of better sourcing, and product improved. 'We have completely revamped our product. We've got much more innovative and much more fashionable,' said Gordon.

Mothercare last week reported profit before tax and exceptionals of£17.3 million, from losses of£22.4 million in 2002. Sales climbed 3.5 per cent to£446.9 million, as the retailer completed the first year of a three-year recovery plan. Same-store sales in the seven weeks to May 14 leaped 5.8 per cent.

Teather & Greenwood analysts ascribed the success to merchandise. 'Store formats, pricing and advertising all play a part, but if the product is not worth buying, none of these factors will be sufficient to sustain more than the briefest rally,' the broker noted.

Meanwhile, Mothercare will embark on its most ambitious expansion programme in a decade. The retailer intends to open 10 shops a year over the next five years, and has identified 40 high street and 20 out-of-town locations.

The international business is also poised for growth, with plans for 100 more franchised stores over the next three years in new and existing markets.