Carpetright slumps to large full year loss
Carpet and flooring retailer Carpetright has posted a full year pre-tax loss of £70.5 million compared to a profit of £0.9 million in the previous year.
In the year to 28 April, group revenue declined by 3% to £443.8 million while underlying EBITDA fell to £6.4 million from a prior £28.6 million.
Like-for-like sales in the UK declined by 3.6% as a fall of 7.8% in the second half offset a first half uplift of 0.7%. Underlying EBITDA dropped to £2.9 million from the previous year’s £20.9 million due to the decline in sales and a lower margin rate.
Meanwhile, like-for-like sales increased by 1.2% in the company’s Rest of Europe business driven by service related income and currency translation. However, EBITDA declined to £3.5 million from a prior £7.7 million.
In April, Carpetright announced that it will close 92 stores as part of a restructuring plan to help turn around its struggling business.
Today Carpetright said significantly increased competition and signs of a slowdown in consumer spending had left it exposed, particularly given its historically oversized and over-rented store estate.
Wilf Walsh, Carpet chief executive, 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. This will be a transitional year for the group as we work through our recovery plan."
Looking at current trading, Carpetright said sales in the first eight weeks of the new financial year have been impacted by the disruption arising from its restructuring activity, in particular stock shortages as some suppliers had withdrawn supply. Trading has also been hit by the period of exceptionally warm weather.
Following the approval of the CVA and completion of the recapitalisation, the company has now begun to see the benefits of stock replenishment by suppliers, although UK like-for-like sales remain negative.
Carpetright said completing the turnaround will take time and will be "challenging" although the implementation of the CVA is now well underway with 92 stores on track for closure by teh end September.
Walsh added: “As well as being demanding, the duration of this process means that the benefits will not be fully seen during 2018/19 and will only begin to take effect in the second half. However, we do believe that we now have a bedrock in place of a largely right sized and right rented retail estate supported by plans to develop a compelling digital offer that will see us grow profitable market share over the next few years.”
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