Right time for carpet sales: The Investment Column

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The Independent Online
It is always inevitable that founder entrepreneurs will eventually seek to reduce their holding in their creation some time after it goes public. It happened with Sir Graham Kirkham at DFS Furniture and it is happening now with Lord Harris at Carpetright.

Such decisions can upset shareholder sentiment and be taken as a sign of reduced confidence in future prospects. But there were no signs of that yesterday following Lord Harris's decision to sell a chunk of his holding. The shares even rose 7p to 598p.

That the market was so unruffled is a sign of how highly regarded this company is. Since flotation in June 1993 the shares have risen four-fold and Carpetright's share of the UK carpet market has mushroomed from 6 per cent to 17 per cent.

Yesterday's figures were as sparkling as usual with pre-tax profits in the first half up 38 per cent to pounds 14m on last year. Like-for-like sales were 16 per cent ahead and still are in current trading. The margin also rose by 3.5 percentage points to 48.6 per cent. It was here that the City had its only gripe. Carpetright has changed the way it accounts for carpet fitting and this change accounted for 2 percentage points of the margin increase.

That aside, it was all very upbeat stuff. The group has 290 stores and is rolling out its larger Carpet Depot format aggressively. It will open another 24 this year, taking the total to more than 70. Lord Harris's longer-term plan is still to have a market share of 30 per cent by 2000. Beyond that Lord Harris may need to look abroad to keep up the breakneck expansion. But for now the outlook is promising. Carpetright is even saying that the knock-on effect from the upturn in the housing market is not expected to feed through to carpets until the spring.

On NatWest's profit forecast of pounds 35m for the full year, the shares trade on a forward rating of 20. Not cheap but still worth holding.