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Mothercare plummets in latest UK retail Christmas disaster

[LONDON] Mothercare Plc reported a sharp drop in UK sales over the holiday season in the latest sign that the country's retailers suffered a miserable Christmas.

Like-for-like sales in the U.K. declined 7.2 per cent in the 12 weeks through Dec. 30, the childrenswear retailer said in a statement Monday. Gross margins are also set to fall due to higher levels of discounting required to reduce stock in post-Christmas sales, the company said. The shares plummeted as much as 32 per cent, the biggest intraday decline on record.

"We are not anticipating any improvement in the short-term market conditions for the U.K.," Chief Executive Officer Mark Newton-Jones said in the statement.

The Brexit-induced weakness of the pound and increases in the minimum wage have inflated retailers' costs, while demand is being sucked away by nimbler online rivals and a squeeze on Britons' disposable incomes. Poor Christmas sales are bringing these issues to a head, with Debenhams Plc warning last week that its full-year profit would miss estimates due to weak holiday sales, while its department-store rival House of Fraser Ltd. is seeking rent reductions from landlords.

Mothercare expects full-year pretax profit to be between 1 million pounds and 5 million pounds. The average estimate of four analysts surveyed by Bloomberg was for profit of 11.9 million pounds.