Carpetright in talks with lenders amid warning over annual loss
The firm said trading has remained under pressure, with sales still falling despite a small improvement since its last profit warning in January.
Carpetright has warned it is set to swing to a full-year loss and said it has started talks with its lenders as the woes in the retail sector show no sign of letting up.
In its second profit warning in less than two months, the firm said trading has remained under pressure, with like-for-like sales still falling despite a small improvement since January.
It has kicked off talks with its lenders to ensure it does not breach the terms of its bank loans and is looking at options to speed up a trading turnaround, although it said plans were at an “early stage”.
The warning comes in a dire week for the retail sector after the collapse of Toys R Us and Maplin on Wednesday, which has threatened thousands of jobs.
Carpetright said: “Although the important Easter trading period is still to come, UK like-for-like sales remain below management expectations and the group now expects to report a small underlying pre-tax loss for the year ending 28 April 2018.”
The company said its lenders had signalled they remain “fully supportive”.
Carpetright sparked a shares crash in January when it warned over profits and said like-for-like UK sales had fallen 3.6% in the 11 weeks ending January 13 – its crucial Christmas trading period.
It had earlier warned over the full-year outlook in December.
The chain has blamed weak consumer confidence for the sales woes, which it said has continued since the start of the year.
The group has 416 stores in the UK and 552 worldwide.
It has already been refurbishing its estate in the UK as part of a turnaround strategy and looking to offload loss-making stores, which have been dragging on the wider performance of the firm.
But, in its latest update, the group said there was a brighter outlook for its international arm, with trading in the rest of Europe improving, led by a recovery in like-for-like sales in the Netherlands.
Neil Wilson, senior market analyst at ETX Capital, said it was a “bad week for retail as Carpetright’s woes get worse”.
He added: “Weaker consumer sentiment for big-ticket items is a factor, as well as tougher competition from a more diverse marketplace.
“Meanwhile, the slowdown in the property market means people are moving less often and therefore upgrading soft furnishings less often – the less often people move, the less often they purchase a new carpet.
“Carpetright is also a business that probably hasn’t quite adapted to the changing retail landscape quite as fast as it might.”