Harris warns year ahead is 'toughest' faced in half century
Wednesday 02 July 2008
Lord Harris, the chairman and chief executive of Carpetright, warned that next year would be one of the toughest in his 50-year career, although he forecast that the carpet retailer's fortunes would improve in the second half of 2009.
The comments of Lord Harris of Peckham came as the group posted pre-tax profits down 11 per cent from £67m to £59.5m for the 53 weeks ending 3 May.
Lord Harris said: "There is no doubt that the UK floor coverings market became more difficult, in line with the other housing and DIY-related sectors. The challenge has remained and I believe that next year will be one of the most difficult I have seen."
He forecast that the slowdown in sales may last for another year at Carpetright but that consumers will feel the strain for longer. "We have got six to 12 months before trading will improve. But for the rest of the country, it will be the next two to three years," he said.
He said the cost of buying carpets for Carpetright has gone up by 10 per cent since Christmas. "The downturn has been slightly quicker but that is driven by the oil price and the weakness of the pound against the euro because we do not make much [carpets] in this country," he said.
For the year to 3 May, Carpetright grew its total group sales by 9.6 per cent to £521.5m. In the UK and Ireland, the retailer increased sales by 8.3 per cent – driven principally by its acquisition of Storey Carpets in 2007 – to £452.7m, but its like-for-likes fell by 2.7 per cent.
Lord Harris said that Carpetright would consider further acquisitions if the right opportunities arose. "We are in a strong position in a weak market," he said. "We are looking at other acquisitions in Europe ... We would be very unlikely to do an acquisition in the UK because there is no one to take over."
Two days ago, Carpetright acquired Ben de Graaf, a floor covering and curtain retailer that operates 11 stores in the southern Netherlands, for €7.8m (£6.2m). At the end of 2007, the group entered a 50/50 joint venture with TTL, a German floor covering retailer, to pilot Carpetright in Germany, and the first Carpri-branded store opened in Berlin in April.
Lord Harris said that Carpetright will continue to take costs out of the business. "We try to be lean and mean." For instance, it has identified that it can downsize more than 100 stores to reduce its rent bill.
Philip Dorgan, an analyst at Panmure Gordon, said: "We expect Carpetright to outperform the market and maintain strong cashflow and good returns." However, he said that given Lord Harris's comments about next year, Panmure Gordon has adjusted its forecasts to slightly below consensus to reflect this.
Carpetright's shares closed down 40.5p at 619.5p.
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