- Carpetright made a £8.7m pre-tax loss in the year to April 28
- Sales fell 3% to £444m amid tough trading and increased competition
- The firm is closing 81 shops after complaining its store estate was unsustainable
Carpetright swung to an underlying pre-tax loss of £8.7million in its last full year, having made profit of £14.4million the year before.
The losses are in-line with guidance issued by the struggling floorings firm earlier this year when it flagged ‘tough trading conditions’ and reduced consumer confidence in the UK.
Carpetright’s like-for-like sales fell 3.6 per cent across the year to April 28, with a plummet of 7.8 percent in the second half offsetting a 0.7 per cent increase in the first.
Chief executive Wilf Walsh said the legacy store estate was unsustainable and has received support to close 81 of its 418 shops through a CVA. The move endangers around 300 jobs
The losses come as the retailer has been granted permission by creditors and shareholders to pursue a Company Voluntary Agreement (CVA) – a controversial restructuring procedure that will allow it to shut 81 shops and slash rents at 113 others.
Carpetright complained that its ‘legacy’ and ‘over-rented’ store portfolio was unsustainable and holding it back.
The retailer has also been challenged by increased competition, namely new rival Tapi – a floorings firm backed by Carpetright’s founder and former boss Lord Harris.
Costs relating to its store closure plans added up to £61.8m during the period, resulting in a statutory pre-tax loss of £70.5m, compared with a small profit the year before.
Chief executive Wilf Walsh said: ‘After a difficult trading year impacted by reduced consumer spend, increased competition and the legacy of an unsustainable, over-rented store portfolio – the CVA and recapitalisation offers us the chance to rebuild Carpetright which remains the clear market leader in floor coverings with outstanding consumer brand awareness.’
Carpetright said today that ‘adverse publicity’ surrounding the restructuring also caused the tightening of credit terms by suppliers, which contributed to a jump in its net debt position from £9.8m to £53m.
This also impacted stock availability during the period and into its new fiscal year after some suppliers withdrew supply.
Today the retailer said it has made further progress with the introduction of its new branding and store revamps and pledged to plough additional investment into all its remaining UK stores by the end of the CVA period in 2021.
Carpetright is refurbishing its profitable UK stores and upgrading its web platform
The retailer cautioned today that trading in the first eight weeks of the new fiscal year has been ‘heavily impacted’ by CVA disruption, stock shortages and ‘exceptionally warm weather’.
However, it said business has picked up in more recent weeks following the CVA approval and ‘less negative publicity’.
Analysts at Peel Hunt ventured that Carpetright will return to sales growth in the autumn and become profitable again in 2020.
But Neil Wilson, analyst at Markets.com, said Carpetright’s management team should be given time to ‘rebuild the business’.
At the open, Carpetight’s shares fell 3.33 per cent to 29p.