Mothercare has issued a shock profit warning which has seen its share price plummet in this morning’s trading.

Mothercare has issued a shock profit warning which has seen its share price plummet in this morning’s trading.

This comes as a surprise, following a marked improvement in its last set of results, which included the first half-year underlying profit in four years.

There are real similarities to Debenhams’ recent profit warning in Mothercare’s statement, with the business reporting that “in the UK, the highly promotional nature of the Christmas period and lower seasonal footfall have impacted both sales and margin”.

With consumers leaving their shopping later this year the high street was particularly competitive and, when it came to the crunch, Mothercare came up short against rivals such as John Lewis and the supermarkets, despite its promotional activity.

Even online Mothercare struggled, with ‘Direct in Home sales’ falling 1%, despite Mothercare.com sales growing 15% and click-and-collect reportedly performing well. This implies that the Early Learning Centre website saw significant declines, no doubt losing out in the tough toys sector to the likes of Amazon, Argos and Asda.

Mothercare also points to the decision not to repeat 2012’s free delivery offer as hurting performance. For all its impact on margins, free delivery is a key demand of consumers and can make all the difference when shoppers are faced with a choice. By choosing not to match the likes of Amazon on this front Mothercare placed real faith in the pulling strength of its products and proposition and unfortunately this gamble seems not to have paid off.

Even international sales, long heralded as the future of the group, performed poorly, with the volatile global economy and areas of extreme weather blamed.

This news is a major blow to Mothercare, with its previous narrative of slow and steady progress undermined by the fact it is seemingly still extremely exposed when subjected to intense competition.

Chief executive Simon Calver’s strategy is a good one and focuses on the right areas, envisioning a business with fewer, better stores, a stronger multichannel presence, better service and a powerful international brand. However, Mothercare’s competitors are affording it little breathing space to make this not inconsiderable transition and 2014 looks set to be a make or break year.

Matt Piner is research director at Conlumino

Updated: Mothercare warns on profits amid 'highly promotional' Christmas conditions