Carpetright turns to Europe as sales dip

By Susie Mesure
Tuesday 14 January 2014 06:02
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Britain's biggest carpet retailer, Carpetright, yesterday unveiled tentative plans to expand into Europe, buying 50 per cent of a Benelux carpet chain for €15m (£10m).

Carpetright, which has an option to acquire the rest of Carpetland within three to five years, is also paying €35m for the retailer's 12 freehold and three long leasehold properties.

Lord Harris of Peckham, the chairman and chief executive, said he had chosen Carpetland's 92 stores in Belgium, Luxembourg and the Netherlands for his group's expansion springboard because they had "growth potential and were badly run". The acquisition is expected to enhance earnings this year.

Lord Harris said he was confident of improving Carpetland's margins, reducing costs and growing sales and market share. "It's like going into a carpet shop in the Seventies in England. They have let the competition take over," he said, describing Carpetland's retail base. He expects to grow the retailer's share of the Benelux market to 10 per cent from 5 per cent over the next three years.

The move across the Channel came as Carpetright revealed that underlying sales growth had slowed to 4.2 per cent in the first eight weeks of its new financial year, against 6.7 per cent a year earlier, as consumers chose to watch football and celebrate the Queen's golden jubilee rather than buy carpets. Lord Harris said the World Cup had cost the group £2.5m in turnover although he said the sales were "delayed" rather than lost.

While Lord Harris brushed off any fears that a housing market slowdown would further dent purchases of carpets and floor coverings, he said future like-for-like sales were more likely to be about 7 to 8 per cent rather than the 12 per cent growth seen before the World Cup started.

"We would rather have a slow housing market where people stay where they are and spend money on the house they are in. Ours is a 92 per cent replacement market. Interest rates up to 7 per cent don't worry me," he said.

Joan D'Olier, a retail analyst at Deutsche Bank, said the Carpetland acquisition was "a useful stepping stone into Europe". David Stoddart at Teather & Greenwood said the move looked "very sensible" but pointed out that British retailers traditionally struggled to expand on the Continent. Mr Stoddart said Carpetright faced the "usual risks" of different culture, legal frameworks and shopping patterns.

Carpetright reported an 18 per cent increase in pre-tax profits for the year to 27 April.

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