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Carpetright shares initially fell almost 7 per cent after it issued its seventh profit warning within 18 months on Tuesday as weakening consumer confidence in the eurozone took its toll on the flooring chain.
It now expects full-year underlying pre-tax profit to be between £3m and £4m, down from a previous range of up to £8m.
Group sales were down 4.2 per cent in the 11 weeks to April 14. Sales in its outlets in Ireland, Belgium and the Netherlands slipped 8 per cent in the period.
The homeware sector has been one of the hardest-hit areas on the high street as cash-strapped consumers delay replacing big-ticket items.
Its fortunes are also linked to the level of property transactions as high property sales increase the likelihood of refurbishment projects, but that market also remains depressed.
“The market in which they’re operating is one of the toughest in retail,” said Neil Saunders, managing director of retail consultancy Conlumino. “It can’t really do anything else but suffer to a degree.”
The fate of Allied Carpets, one of Carpetright’s smaller rivals, this week underscored the fragility of the sector.
The chain’s remaining handful of stores were bought by a company associated with Floors-2-Go, a Midlands-based retailer, in a pre-pack administration deal following its third collapse in four years.
Carpetright will stick to its strategy of honing its existing store portfolio of more than 600 outlets to revive flagging sales, said Neil Page, Carpetright finance director.
This will include refurbishing another 100 stores on top of the 32 that have already received a makeover, which cost around £60,000 per store, and improving the training of its carpet fitters.
It will also focus on negotiating reduced rents for the 90 stores whose leases come up for renewal in the next five years, Mr Page added, after already negotiating reductions of around 10 per cent for 40 of its stores.
Carpetright said there were signs its approach was starting to bear fruit, with sales in the refurbished stores typically 10 per cent higher than their peers. It also helped UK like-for-like sales return to growth, rising 1.4 per cent in the period,
The rise in UK like-for-like sales was a positive surprise, said James Dilks-Hopper, retail analyst at Numis.
“I don’t think its survival is in question, but what level of profitability it can return to,” he said. “The cost of doing the refurbishment is fairly small and fundamentally it’s a well-managed company.”
“Green shoots are there,” another analyst added, “but will take a while to come through.”
Shares in Carpetright were down almost 2 per cent to £5.95 in late London trading.