By James Davey
LONDON (Reuters) - Mothercare Plc <MTC.L>, the mother and baby products retailer, said it was well set for growth as parents continued to spend money on their children even if they have stopped spending on themselves.
The group, which trades from 1,014 stores in 51 countries, posted a 12.4 percent increase in year profit on Wednesday and hiked its dividend by a fifth, sending its shares higher.
"Given the uncertain consumer environment we are planning cautiously for 2009/10. However, we are well placed as we enter the new financial year," said Chief Executive Ben Gordon.
But he reiterated that gross margins will come under further pressure from the weak pound.
Many retailers are struggling as cash-strapped consumers rein in spending amid rising unemployment, falling house prices and fears of a long recession.
But Mothercare has bucked the trend, benefiting from selling essential products for parents, aggressive international expansion, a fast-growing Internet and home shopping business and the successful integration of the Early Learning Centre brand it purchased in 2007.
Shares in Mothercare have risen 46 percent over the last six months in line with the FTSE All Share General Retailers Index <.FTASX5370>.
The stock was up 2.4 percent at 426 pence at 10:23 a.m., valuing the business at 379 million pounds, having earlier touched 454p.
"The company's defensive product range should continue to stand it in good stead irrespective of the consumer environment, but there are also plenty of positive strategic initiatives underway to drive longer term growth," said analysts at Cazenove in a research note.
International expansion represents the biggest single growth opportunity for Mothercare. It plans to open at least 100 overseas stores every year for the foreseeable future, focussing on the Middle East, Russia, Eastern Europe, China and India.
In the UK it is restructuring its property portfolio and with 50 percent of its leases coming up for renewal in the next three years will seek better terms. It also plans to open out-of-town 'Parenting Centres' and new stores in malls and city centres.
Mothercare made an underlying pretax profit of 37.1 million pounds for the year ended March 28, in line with analysts' forecasts, and up from 33 million pounds in 2007/8.
Sales increased 6.9 percent to 723.6 million pounds, with UK like-for-like sales up 1.4 percent and sales from the international franchise business up 40.9 percent.
"This has been another strong performance from Mothercare group and as a result we have recommended a 20.8 percent increase in the total dividend (to 14.5 pence)," said Gordon.
Mothercare is debt free, ending the year with a net cash balance of 24.8 million pounds.
(Editing by Greg Mahlich and Erica Billingham)