News Column

Profit warning for Carpetright after struggle in Netherlands

January 29, 2014

ByAndy Richardson

CARPETRIGHT , the struggling European floor coverings retailer, has issued a profits warning for the second time in less than fourmonths. The floorings retailer saw UK like-for-like sales bounce back with a 1.9 per cent rise in its third quarter to January 25 , but said extremely difficult economic conditions in the Netherlands would leave it nursing losses in its overseas division. Despite an expected increase in UK earnings over the full year, the Netherlands hit was now set to see overall profits for the year to April miss City forecasts of between [pounds]9m and [pounds]11m. The alert marks its second since early October, when founder Lord Harris of Peckham also made a dramatic return to the helm after the shock departure of chief executive Darren Shapland . Lord Harris , who was formerly non-executive chairman, also cautioned that trading in the UK remains volatile, with high street conditions still tough. He said: "In the UK , the pace of the recovery remains uncertain in the face of continuing sales volatility, but we are confident that our selfhelp measures have further potential. "However, with a further weakening of the market in the Netherlands , we now expect underlying pre-tax profits for the full year will be below the lower end of the current range of market expectations.' ' Carpetright's UK sales rise comes after an 0.8 per cent fall in the half-year and follows turnaround efforts including revamping outlets and reviewing the locations of its 473-strong core estate. It pointed out that falling wholesale trade held back an even bigger improvement in the main retail division, which recorded a 2.5 per cent increase in like-for-like sales. Carpetright has suffered a difficult financial year, following a marked recovery that more than doubled underlying annual profits to [pounds]9.7m for the year to April last year. The woes in Holland have compounded uneven trading since then in the UK , in spite of the wider economic recovery and burgeoning housing market. While trading was in line across its other international businesses in Belgium and Ireland , overseas like-for-like sales plunged 7.7 per cent due tothe dismal performance from the Netherlands , where it has 95 stores. Freddie George , retail analyst at Cantor Fitzgerald , said core issues with its trading model in the UK also needed addressing. He said: "We continue to believe that the company's conforming format is not effective enough against the independents. "It is too focused on price, in our view, and not aspirational enough for mainstream customers."

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Source: Northern Echo (England)

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