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Tougher trading sees Carpetright issue profits warning

Retailer Carpetright has warned over profits after seeing sales growth slow as consumer caution took its toll.

The flooring chain reported UK like-for-like sales rising by 1.4% in its final quarter to April 22, down from 1.9% in the previous three months, amid a "more difficult consumer environment".

Chief executive Wilf Walsh cautioned that the tougher trading would leave annual underlying profits towards the lower end of expectations for between £13.9 million to £16.2 million in the year to April 29.

This is set to mark a sharp fall on the £17.3 million posted the previous year.

Mr Walsh said: "In common with other retailers in the home improvement sector in the UK, we have experienced tougher trading conditions over the last three months.

"Whilst we remain confident in our turnaround plan, the level of sales growth in our final quarter leads us to expect that full-year profits will be towards the lower end of the current range."

The profit alert comes amid increasing fears of a consumer spending slump as inflation caused by the Brexit-hit pound starts to bite.

Costa Coffee and Premier Inn owner Whitbread also sounded the alarm over a "tougher consumer environment" in 2017 as it posted annual figures on Tuesday.

Official figures last week showed the biggest fall in retail sales for seven years in the three months to March as rising living costs ate into household spending.

The Office for National Statistics said sales fell by 1.4% over the three-month period, while also sinking well below expectations to drop by 1.8% on the month to March.

The impact of price rises is expected to see wider UK economic growth pull back to 0.4% in the first quarter of 2017 from 0.7% in the final three months of last year.

Carpetright's slowing sales growth marks a wobble in its recovery after returning to positive UK sales in the previous three months.

The group suffered a bumpy 2016 after the Brexit vote and collapse of the pound, with first half profits slumping 42% to £4.1 million after being hit by falling consumer demand, stiff competition and rising costs of imported goods.

But Mr Walsh plans to plough on with its overhaul, having refurbished 188 stores in its fourth quarter, more than the 150 expected.

It also closed three stores and relocated two stores into smaller sites, leaving it with 414 in the UK and 13 concessions.

Its 138-strong chain across Europe reported a 1.4% rise in like-for-like sales over the final quarter, with the boost from the lower pound helping total sales in the region jump 11% higher.

Carpetright's shares plunged as much as 15% at one stage after the trading update.

Analyst Mark Photiades, at Cantor Fitzgerald, said: "We understand that trade remained volatile and that market conditions were challenging, as flagged by a number of other retailers.

"That said, management were pleased that like-for-likes remained positive in each month of the quarter and that the work being done to the store estate continues to deliver positive results."

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