Carpetright's share price drops off after it warns on profits

 
Helen Cahill
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Carpetright has been refurbishing its stores (Source: Carpetright)

Carpetright's share price dropped off this morning after the retailer warned that its full-year profits will be at the lower end of its previous guidance.

The figures

For the 12 weeks ending 22 April, Carpetright's like-for-like sales grew by 1.4 per cent in the UK. In the rest of Europe (Carpetright has outlets in Netherlands, Belgium and Ireland) like-for-like sales were up by 1.4 per cent on a local currency basis.

Read more: Carpetright bosses up their stakes in the company after sales drop

However, the retailer warned that its full year profits will be at the "lower end of the current range" of between £13.9m and £16.2m.

At time of writing, Carpetright's share price was down eight per cent at 225p.

Why it's interesting

Carpetright warned last summer that it might be hit by a drop in consumer confidence after the EU referendum, causing its shares to drop by a fifth.

But, it seems consumer confidence is not Carpetright's only problem. Cantor Fitzgerald analyst Mark Photiades said that the rise of Tapi, a new competitor which now has more than seventy stores, needed to be "monitored closely". The company has been pushing through a programme of store refurbishments to entice customers, but the new competition remains a "key risk", he said.

"The key risk, in our view, is the further development of Tapi, which is having an impact on sales gross margins and competition for sites," Photiades said.

What Carpetright said

Wilf Walsh, chief executive of Carpetright, said: "In common with other retailers in the home improvement sector in the UK we have experienced tougher trading conditions over the last three months.

"Whilst we remain confident in our turnaround plan, the level of sales growth in our final quarter leads us to expect that full year profits will be towards the lower end of the current range."

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