Carpetright losses widen as revenue drops
By Michele Maatouk
Date: Tuesday 11 Dec 2018
(Sharecast News) - Interim losses at beleaguered floor coverings retailer Carpetright widened as it restructured its store estate, but there were some bright spots in the results.
In the 26 weeks to 27 October, the statutory loss before tax widened to £11.7m from £600,000 the year before, as revenue fell 15.7% to £191.1m. Like-for-like sales in the UK, meanwhile, were down 12.7% over the half, but the company said there had been a marked improvement in the second quarter, when they fell 8.9% compared to a 16.8% drop in Q1.
Carpetright said "negative headlines" affected customer confidence and the retailer's requests for deposits "became a significant issue" for some. In addition, a withdrawal of credit insurance by certain providers caused the group some stock problems early in the period.
However, Carpetright said its maintained position as market leader is now ensuring that it is moving closer to the terms it enjoyed with the majority of its suppliers prior to the implementation of the CVA.
Another positive was that the company said it has made significant progress in reducing its cost base and is on track to deliver the annualised savings of £19m outlined at the time of the equity fundraising in June 2018. In addition, the average remaining life of lease in UK stores has been reduced to 3.5 years from 5.5 years, with 52% of stores having the option to break within two years, giving the group increased flexibility to exit, relocate or re-negotiate the level of rent.
Chief executive officer Wilf Walsh said: "This is a transitional year for Carpetright as we work through our restructuring plan. We remain on schedule and are confident that this activity is already starting to yield benefits. This is the first stage in returning the group to sustainable long term profitability."
Neil Wilson, chief market analyst at Markets.com, highlighted "encouraging signs" in the results, such as the fact that the group is on track for its cost savings and the reduction of the average store lease.
"The problem for Carpetright was simply that it had expanded too quickly with too many stores on bad sites with overly-long leases and upwards-only rent reviews. Action to tackle this singular problem has been swift and is paying off," he said.
At 0915 GMT, the shares were up 8.8% to 17.78p.
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