Mothercare shares slide on profit downgrade

Shares in Mothercare fell sharply on Friday after the baby goods retailer warned that profits would be at the lower end of expectations.

The retailer also said it might breach its lending agreements and was seeking additional sources of funding.

Chief executive Mark Newton-Jones said trading had become "more challenging".

The warning that annual profits were likely to be near the bottom of its forecast £1m-£5m range sent shares down 15.5% to 21p by the close of trading.

However, Mothercare said it expected net debt to be slightly lower than the £50m it had forecast.

Fears have been growing about the state of the UK retail sector. Earlier this week, both Toys R Us UK and electronics chain Maplin went into administration.

Mothercare, which has been cutting costs, said it was continuing with its strategy of closing UK stores and bolstering online sales.

The retailer said it would cut its store numbers from 140 to 80 in response to the trend to online shopping, which now makes up 42% of its revenue.

Many retail chains have been hit by weak consumer confidence, with shoppers being squeezed as wages fail to keep pace with rising inflation.

Mr Newton-Jones said: "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."