Mothercare customers warned of higher prices after pound slump

Parents face paying higher prices for baby clothes after Mothercare (Other OTC: MHCRF - news) warned on the impact of the slump in the pound.

It said prices are expected to rise between 3% and 5% from the middle of next year as sterling's collapse since the Brexit vote pushes up costs.

The warning came as Mothercare revealed it had slipped to a first-half loss as bad weather over the summer and turnaround costs weighed on its UK business. Shares (Berlin: DI6.BE - news) fell 6%.

The babycare retailer's international arm saw revenues boosted by the weaker pound but it had a tough time at home, with sales down and warehouse changes disrupting product supply.

Mothercare reported a loss of £800,000 for the 28 weeks to 8 October, compared with a profit of £5.8m in the same period last year.

UK like-for-like sales fell 0.7%.

Internationally, where Mothercare makes nearly two-thirds of its sales, trading remained "volatile" and sales also declined, though the fall in sterling meant that overall they were higher in pound terms.

But next year the retailer faces a negative impact from the pound's plunge, especially on the cost of clothing and footwear ranges it buys in US dollars from the Far East (Kuala Lumpur: 5029.KL - news) and India.

Chief (Taiwan OTC: 3345.TWO - news) executive Mark Newton-Jones said the fall in the pound would have a "big impact".

He said the group had negotiated with suppliers for them to absorb a third of the higher cost, with another third borne by Mothercare and the remainder passed on to customers.

There have already been warnings on the impact of the pound's fall on prices of products ranging from bacon and Australian wine to electrical goods .

The latest comes as Mothercare reported tough first-half trading.

Mr Newton-Jones said: "The last six months have been challenging and ... our sales and margin stalled in the period."

He pointed to a "widely reported slowdown in sales across the high street due to unseasonal weather through the spring/summer season".

This had resulted in a higher markdown on prices - a tactic which, while it can boost sales, squeezes profit margins.

Planned warehouse infrastructure changes had been completed but it did mean "a reduced flow of product for eight weeks in the summer" as well as a one-off cost increase.

Mothercare is in the second year of a turnaround programme which has seen unprofitable stores closed and others refurbished, and an upgrade for distribution and its online operation.

Mr Newton-Jones said despite the tough first half, the latest period had started in line with its plans and Mothercare was "well-prepared for the important peak season".

Progress in the second half would "partially compensate for the headwinds" experienced in the first, he added.

Mothercare's half-year results come as a setback after it reported its first annual profit for five years in May.