Carpetright cuts sales and profit-margin forecasts

  • @Thompj

The floor covering specialist Carpetright issued its ninth profits downgrade in 18 months yesterday and warned that it saw no respite over the next year from the brutal slowdown in consumer spending.

Carpetright, which has 643 stores in the UK and abroad, pulled no punches when it described trading as "volatile" from one week to the next, saying customers were waiting for promotional discounts before spending.

The hefty discounting, and an increasing proportion of lower-margin beds in its product mix, took its toll on the group's gross margins, which tumbled by 400 basis points in the 25 weeks to 22 October.

Further grim news from a 6.8 per cent fall in Carpetright's like-for-like sales over the past 12 weeks of the period led the group to warn that it now expects full-year pre-tax profit to be at the lower end of City expectations, of between £16.9m and £11.8m. The former was its actual profit figure in the year ending 30 April 2011.

Neil Page, the finance director of Carpetright, said: "It is a tough retail environment and we have, alongside many other retailers, found it a difficult situation."

While Carpetright's discounting has hit its margins, Mr Page was "pleased" with the response of customers to its latest Madness Discount promotion across all its products in September. He said: "When we offer the stronger promotions, people are spending more and that just shows they are seeking value at the moment."

The group is also fighting back by increasing, and smartening up, its bed offer in existing stores, as well as opening its first standalone bed shop under the Sleepright by Carpetright banner in Uddingston, Scotland, next week. It will add another four trial bed stores over the coming months.

Mr Page said Carpetright had reduced its losses in the Republic of Ireland and increased profits in the Netherlands and Belgium over the half year.

However, he said: "I think it is going to be a challenging and tough retail environment into 2012."

Shares in Carpetright, which has seen nearly 40 per cent wiped off its market capitalisation this year, ended up 5p at 490p yesterday.