Tesco 'considering Mothercare bid'

Tesco is reportedly considering a surprise swoop for struggling Mothercare as part of its wider campaign to breathe new life into struggling large supermarkets.

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Mothercare issued a profits warning after reporting disappointing Christmas trading

It raises the prospect of Britain's biggest grocer swallowing up one of the best known names in high street retailing.

The report in the Sunday Times comes in the wake of Mothercare shares plunging after it issued a shock profits warning after reporting disappointing Christmas trading.

Retail sources told the newspaper that Tesco had examined a bid six months ago but put the plan on hold.

But City insiders reportedly said the price fall could rekindle Tesco's interest. The sources told the Sunday Times it had made no approach. Tesco declined to comment.

Over the last couple of years, the group's expansion beyond groceries has seen it snap up the Giraffe restaurant chain and invest in the Harris + Hoole cafe business.

They are seen as being used in part to occupy excess space in its larger supermarkets, amid Tesco's aims to turn them into destinations to "meet, eat and drink, as well as shop".

The biggest shops within the supermarket sector are now seen as having too much retail space, with huge areas once devoted to goods which customers now increasingly buy online.

Tesco's overall performance has struggled recently, with its share of the grocery market slipping below 30% according to industry figures, while like-for-like sales in the six weeks to January 4 were down 2.4%.

Major supermarkets have seen the performance of their core large stores squeezed by discounters Aldi and Lidl though online performance has forged ahead and they are also investing heavily in smaller convenience locations seen as a growth area.

Mothercare saw shares slump 31% in one day earlier this month after it revealed profits would be short of City expectations, squeezed by rivals' promotions and lower footfall over the Christmas period. UK sales fell 9.9% in the 12 weeks to January 4.

It has 231 stores under the Mothercare and Early Learning Centre brands.