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Business News

Carpetright adds to retail gloom as sales fall through the floor

Carpetright added its name to the growing list of retailers reporting deepening gloom on the high street, warning yesterday that its sales have fallen by more than 15 per cent in the UK and Ireland during the past three months.

The carpet and floor coverings retailer said its total sales were, compared with last year, down 9.2 per cent over the 13 weeks to 2 Aug-ust, despite a strong performance from its businesses in the Netherlands, Poland and Belgium. Sales in the UK and Ireland, where more than 80 per cent of its 686 stores are located, fell by 15.4 per cent.

Lord Harris of Peckham, the Carpetright founder who still serves as the retailer's chairman and chief exec-utive, described the retail environment as "demanding" in the face of a collapse in the housing market and lower consumer spending.

"[We have] the lowest levels of consumer confidence and mortgage approvals since records began," Lord Harris said. "The trading environment in the UK has become difficult and we can see this continuing for the rest of our financial year."

The company has managed to ride out the worst effects of the downturn through efficiency gains. Lord Harris said he would continue opening stores despite the slowdown, with nine UK launches planned for the next three months, as well as six new outlets in Poland and Belgium.

The next three months will be key, Lord Harris said, because consumers would have to decide whether to spend their money on home improvements or summer holidays for 2009.

Shares in Carpetright rose by 5 per cent to 595.5p yesterday as investors speculated that the continued depressed nature of its valuation might persuade bidders to make offers. Lord Harris himself offered to take the company private last year and many investors view the company as a special situation play. Its shareholders now include Micro-soft billionaire Bill Gates, who owns 5.1 per cent of the company through his Cascade investment vehicle.

"The response of the share price has been fairly upbeat, reflecting the market's current appetite for interest-rate sensitive stocks and the feeling that there is some chance that Lord Harris will return to the table at some point," said analysts at the stockbroker Killik.

"Remember that a consortium headed by the company's founder offered 1,250p in cash less than a year ago."