Carpetright's shares fly despite fall in profits

 
Helen Cahill
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High Street Shops In Crisis As Spending Cuts Begin To Bite
The firm says it has bee hit by a fall in consumer confidence (Source: Carpetright)

Carpetright's shares flew this morning despite the business' full-year profits plunging as it battles against new entrants in the market and the devaluation of sterling.

Analysts praised a recent turnaround in trading at the retailer, and said it is making strong progress in its strategy to revamp stores.

The figures

In the UK, like-for-like sales for the year ended 29 April fell 0.5 per cent, down from growth of 2.8 per cent in the prior year.

The carpet retailer's UK underlying operating profit fell from £17.8m to £10.7m, a drop of 40 per cent, which Carpetright said was due to currency movements and the investment the business was making to stave off competition.

For the group as a whole, revenue edged up 0.2 per cent to £457.6m, and underlying profit before tax fell to £14.4m from £18.3m, in line with expectations.

At the open, Carpetright's share price jumped eight per cent, but over the past year its share price has fallen 35 per cent.

Why it's interesting

In April, Carpetright warned its full-year profits will come in at the lower end of estimates following a tough trading period. Sales did grow on a like-for-like basis in the second half of the financial year, but this was preceded by a 2.8 per cent fall in sales.

The retailer said it is battling a "challenging consumer environment", waging battle against newcomers in flooring retail. Analysts have pointed out Tapi Carpets, which was launched 2015, has been piling pressure on more established carpet-sellers.

But it seems things may be on the up for Carpetright. Shore Capital analysts said: "Management has outlined the year of significant strategic progress, and today’s statement indicates that positive trading momentum from fourth quarter has continued into the new financial year."

What Carpetright said

Carpetright chief executive Wilf Walsh said:

Our strategy is on track and the positive response we have received from these initiatives has encouraged us to press ahead with plans to complete the refurbishment of the UK store estate by the end of 2018 and to extend the programme in the rest of Europe.

While a challenging consumer environment and competitive landscape remain headwinds, we are confident the additional potential in our self-help initiatives will support an increase in market share.

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