Carpetright profits plummet amid strategic investments and currency headwinds

The flooring specialist said statutory pre-tax profit tumbled 93% to £900,000 in the 52 weeks to April 29 following the impact of costs associated with its portfolio review.

Carpetright said separately reported items of £13.5m were incurred from rationalising its store estate and re-assessing provisions held for onerous leases on loss-making stores.

On an underlying basis, pre-tax profit dropped 21.3% to £14.4m during the year, in line with market expectations.

Retail analyst Nick Bubb said that represented “a surprisingly solid” figure, particularly in the aftermath of a profit warning by DFS earlier this month. 

Carpetright hailed “significant improvement” within its core UK business during the second half, but its British division still suffered a 39.9% drop in underlying operating profit to £10.7m across the year.

In contrast, operating profits in its European business more than doubled to £5.7m, from £2.5m a year ago.

Group revenues were broadly flat at £457.6m, as a 2.6% drop in UK sales to £381m was offset by performance in the rest of Europe, where revenues jumped 16.4% to £76.6m.

‘Strategic progress’

Carpetright chief executive Wilf Walsh hailed a year of “significant strategic progress” for the retailer following what he called “a wide-ranging programme of investment and operational change”.

The business has ploughed capital expenditure into refreshing its brand and revamping stores.

Like-for-like sales in refurbished stores have spiked by an average of 6.8%.

Walsh added: “Our strategy is on track and the positive response we have received from these initiatives has encouraged us to press ahead with plans to complete the refurbishment of the UK store estate by the end of 2018 and to extend the programme in the Rest of Europe.”

Carpetright said it had made an “encouraging” start to its current financial year, with like-for-likes up 2% in the seven weeks to June 17.

But like-for-likes were down 1.2% in its European business on a local currency basis, driven by a calendar shift of public holidays and the “disruption” caused by its store refurbishment plan.

Walsh added: “We have made an encouraging start to the new financial year, underpinned by the improving performance of our refurbished UK estate.

“While a challenging consumer environment and competitive landscape remain headwinds, we are confident the additional potential in our self-help initiatives will support an increase in market share.”