Carpetright share price drops nearly 50 per cent as it warns profits will be “significantly” lower
Troubled retailer Carpetright has slashed its full-year profit expectations after a “sharp deterioration” in UK trading.
Shares in the firm dropped more than 48 per cent to 85p at the market open.
UK like-for-like sales dropped by 3.6 per cent in the period due to lower customer footfall, the company said in a gloomy trading update for the 11 weeks to 13 January.
Trading in the key post-Christmas period was “significantly” behind expectations – in the core flooring category, like-for-like sales had dropped 7.1 per cent since Christmas.
The group’s total sales were down 2.3 per cent as like-for-like sales in its European operations rose by 4.3 per cent in local currency terms.
Carpetright now expects full-year profit to be in the range of £2m to £6m compared with analyst expectations of about £14m.
The news follows a previous profit warning in December that came after Carpetright’s boss Wilf Walsh assured investors that he would meet full-year consensus estimates.
“Despite a positive start to our third quarter, we have seen a significant deterioration in UK trading during the important post-Christmas trading period,” Walsh said.
Walsh said the average transaction at Carpetright was up, but the number of sales made since Christmas had fallen, which he attributed to falling customer confidence.
“The severity of the decline in footfall over this key trading period and our more cautious view of the outlook for the balance of the year leads to a significant reduction in our full-year expectations.
“Against this background of a further deterioration in market conditions, we remain committed to driving through the improvements that are essential to the long term repositioning of the business.”
The group will report its preliminary results for the financial year on 26 June.
Neil Wilson, senior market analyst at ETX Capital, said: “The company has been floored by a horrendous post-Christmas sales period that has significantly hit profitability. As we noted in December, the guidance appeared like wishful thinking and so it turned out to be the case.
“Again it’s the same old story as with other brands that have failed to adapt to changing consumer trends – lower footfall has left transaction numbers down significantly from last year. We must also consider weaker consumer sentiment for big ticket items as a factor, as well tougher competition from a more diverse marketplace.”
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A warning sign
Shares in B&Q owner Kingfisher fell more than three per cent following Carpetright’s profit warning.
Ameet Patel, senior research analyst, said Carpetright’s issues in the past had been seen as company-specific issues, but “the degree of the warning today – with management citing significantly lower footfall specifically – could be more relevant for sentiment on Kingfisher shares given their recent run”.
Shares in DFS Furniture also dropped 3.79 per cent to 198.2p.
Read more: Carpetright floored by intense competition