Carpetright has swung to a loss as the retailer battled with rapidly declining sales and pushed through store closures in a bid to stay afloat.
The retailer made an underlying loss before tax of £8.7 million for the year to 28 April, having made profit of £14.4 million the year before.
Carpetright’s statutory loss before tax was £70.5 million, compared to a profit of £900,000 in the prior year, which the firm said was driven by the cost of its store closure programme.
Group revenue at Carpetright fell by 3% year-on-year, down from £457.6 million to £443.8 million.
The CVA and recapitalisation offers us the chance to rebuild Carpetright which remains the clear market leader in floor coverings with outstanding consumer brand awarenessWilf Walsh, CEO
In the UK, like-for-like sales were down by 3.6%, with the sales decline accelerating from 0.7% in the first half of the year to 7.8% in the second half.
Carpetright’s results come after the company pushed through a Company Voluntary Agreement (CVA), a restructuring procedure allowing it to shut 81 stores.
The store closure programme, which is due to be completed by the end of September, will lead to the loss of hundreds of jobs.
Carpetright said trading was “heavily impacted” while it was putting together its CVA as some suppliers withdrew their supplies, leading to stock shortages.
Net debt jumped to £53 million, up from £9.8 million, which Carpetright said was due to suppliers tightening their credit terms in response to the distress in the business.
Wilf Walsh, Carpetright’s chief executive, said: “After a difficult trading year impacted by reduced consumer spend, increased competition and the legacy of an unsustainable, over-rented store portfolio – the CVA and recapitalisation offers us the chance to rebuild Carpetright which remains the clear market leader in floor coverings with outstanding consumer brand awareness.
“This will be a transitional year for the group as we work through our recovery plan.”
The retailer also secured £65 million of equity financing to fund the business while it carries out store closures.
Carpetright said that in more recent weeks, its suppliers had started to replenish stocks following the CVA’s approval, although UK like-for-like sales were still declining.
At the open, Carpetight’s shares fell 3.33% or 1p to 29p.
Analysts at Peel Hunt said Carpetright would return to sales growth in the autumn, and become profitable again in 2020.
Neil Wilson, analyst a Markets.com, said Carpetright’s management team should be given time to “rebuild the business”.
“The restructuring process is under way and so reading too much into well-reported sales declines may be unwise,” Mr Wilson said.
“Carpetright is a work in progress and management should be given some time to rebuild the business. The problem is that it doesn’t have a huge amount of time to turn things around.”