Carpetright disappoints markets

First-half pre-tax profits of £3 million for 2013 have left the market underwhelmed, following like-for-like profits of £4.5 million in 2012.

The management of Carpetright has stated that market conditions are likely to remain tough for the second half of year. The company is in the middle of a restructuring process and has now modernised 224 premises – just under half of their 474 outlets.

In today’s statement there was hope that improvement in the UK market can continue. Historically there has been a high correlation between floor sales and the mortgage approvals rate, which has been ticking higher. Of course this does beg the question as to why we have not seen it reflected earlier, as there has been steady improvement in mortgage approvals since July 2012.

A picture that has been replicated at many retailers is the dragging effect that European sales have had on net returns. The weakest market appears to be in the Netherlands, as both Ireland and Belgium appear to have maintained previous years’ standards.

The company has embarked on diversification with Sleepright, through which it offers the sale of beds in almost half of its outlets. However, comparatively its ability to improve online sales is still well below that of other retail sectors.

As three of the institutional broker recommendations for this company are ‘strong sell’ it is hard to be too optimistic about its short term outlook, but only once the store regeneration has finished will a clearer picture emerge.

Carpetright chart

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