Business

Carpetright shares plunge on new profit warning

Carpetright store Image copyright PA

Carpetright has issued its second profit warning this year and said it is in talks with its banks.

The retailer said conditions since January had "remained difficult" due to "continued weak consumer confidence".

Shares in Carpetright plunged more than a quarter following the warning, valuing the firm at just under £39m.

The company said it was in talks with its banks to ensure it complies with their lending terms, adding the banks "currently remain fully supportive".

Carpetright warned in January that its full-year profits would be between £2m and £4m compared with previous expectations of £14m.

While like-for-like sales - a key measure of underlying performance - have improved since then, Carpetright said they remained negative.

Despite the upcoming key Easter trading period, Carpetright said that it now expected to report a small underlying pre-tax loss for the year to 28 April.

As well as discussions with its banks, Carpetright said it was also examining "a range of options to accelerate the turnaround of the business and strengthen its balance sheet". It added the process remained at an early stage.

Neil Wilson, senior market analyst at ETX Capital, said it could be forced to close some underperforming stores.

"The question is whether Carpetright is just on the wrong end of a cyclical slowdown, or whether there is a deeper structural problem facing this business: the answer is probably some of both," he said.

The company has 416 stores in the UK, the majority of which are in out-of-town retail parks.

It also has shops in Netherlands, Belgium and the Republic of Ireland. Carpetright said that overseas trading had improved, led by a recovery in like-for-like sales in the Netherlands.

In its latest financial results for the six months to 28 October, the company said net debt had swelled to £22.8m, which it said reflecting the continued investment in its store refurbishment programme.

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