Carpetright interim profits surge as modernisation plan pays off

Underlying pre-tax profit surged 34.3% to £9m in the six months to October 31.

Group revenue advanced 1.4% to £231.2m as the UK business delivered a 2.6% increase while the Rest of Europe declined 5%.

In the UK like-for-like sales increased 3.7%, while underlying operating profit jumped 28.8% to £9.4m.

Carpetright said it made “further market share gains” in its domestic market, to 25.7%, up from 25.3% last year and 22.7% in 2010.

In Europe, where the retailer has struggled, particularly in the Netherlands, like-for-like sales increased by 5.5% in local currency terms, against a 3.3% decline in the same period last year.

Underlying operating profit in Europe improved from £100,000 to £600,000, buoyed by improving consumer confidence and “encouraging economic indicators”, such as the number of housing transactions, particularly in the Netherlands and Republic of Ireland.

The retailer closed a net 22 stores, bringing its total to 438, as it “aggressively” manages its store portfolio to “eliminate store catchment overlap; to improve the quality of the estate by relocating to better sites; and to reduce property costs”. Carpetright said the overall aim is to ensure its store base is “better aligned with the needs of today’s customer”.

Carpetright also launched its first “high-profile” brand collaboration with House Beautiful magazine.

Chief executive Wilf Walsh launched a revitalisation strategy a year ago that focused on broadening Carpetright’s appeal by improving the quality and breadth of the offer. It also focused on improving customer service and leveraging the “role floor coverings play in transforming our customers’ homes, while retaining our well established value heritage”.

The retailer has also aimed to refresh the brand by introducing a new “contemporary” logo and the trial of new-format stores aimed at “encouraging experimentation, sampling and discovery”.

Walsh hailed the “significant” profit growth.

He said: “We made good further progress with a wide-ranging programme of initiatives to extend the appeal of the Carpetright brand and address significant legacy property issues.

“The trial of a new retail concept and brand identity is, as expected, producing much valuable customer insight. A comprehensive customer research study will be completed by the end of January 2016, giving us a more detailed picture which will inform our decisions on which elements we will roll-out across the existing estate.

“In a retail market which remains very competitive, we are confident that our plan to build on Carpetright’s strong foundations, modernise the business, and ensure we capitalise on our advantages as market leader to the full, is on track. Our full-year profit expectations remain unchanged.”