Carpetright warns on profits as fragile consumer confidence bites

The flooring specialist said its first half was “undoubtedly challenging” as consumer confidence remains fragile and the business manages the impact of “intensified” competition from new rival Tapi.

Group underlying profit before tax sank 59% to £2.1m in the 26 weeks to October 28, while sales increased 2.6% to £228.1m.

Statutory profit before tax dived 92% to £0.3m. 

Carpetright’s first-half performance was, it said, impacted by the clearance of old bed ranges in the UK and “unsuccessful” promotional activity in its business overseas.

UK

In the UK, the retailer’s like-for-like sales edged up 0.7%, with “solid growth” of 1.9% in flooring offset by reduced bed sales.

Carpetright cleared discontinued bed lines and changed its entire range during the period.

It said its hard flooring category in the UK achieved double-digit sales growth as it benefited from increased customer awareness.

Carpetright continued to invest in its store refurbishment programme and, at the period end, over half of its UK estate had been revamped.

It also said it has responded effectively to increased competition, pointing out that 52 stores have now traded against its new rival for more than 12 months, “delivering like-for-like growth of 5% on average during the half”.

Overseas 

Its business in the rest of Europe was negatively impacted by “unsuccessful deeper discounting promotions in the Netherlands and Belgium”, which chief executive Wilf Walsh said are now being addressed.

This division generated a loss of £0.4m, compared with £1.1m in the same period last year.

Like-for-like sales jumped 6.5%, but gross profit margin sank 730bps. 

Outlook

The retailer said it has made an “encouraging” start to the second half, with UK like-for-likes up 1.4% in the six weeks to December 9.

Core flooring is up 2.7%.

However, Walsh said: “While trading over the first six weeks of the new period has been encouraging, with an acceleration in like-for-like sales growth in both the UK and Rest of Europe, in light of the consumer outlook we are taking a more cautious view of the second half.

“[We] now expect underlying profit before tax for the full year will be towards the bottom end of the current range of market expectations.”

Commenting on the period, Walsh said: “Consumer confidence remains fragile and we continue to manage the impact of intensified competition. 

“Looking ahead we will be focused on maintaining sales momentum in UK flooring, capitalising on the much stronger new range to turn around our beds performance and improving overall trading in the Netherlands and Belgium.”

Carpetright closed 10 underperforming stores during the period, taking the total UK store estate to 418.