Carpetright has reported a first half pretax loss of £800,000 against a £9.8m profit last year as the “very challenging trading environment” hit performance.

In the 26 weeks to October 29, underlying pretax profit slumped from £10m to £1.4m.

Total group revenue dropped 3.9% to £238.4m.

In the UK underlying operating profit tumbled from £11.3m to £0.8m. Total sales fell 5.6% to £192.1m. Like-for-likes fell 2.4%.

Carpetright closed 36 stores in the period, bringing its total to 503.

The retailer said that with 93 stores due to expire in the next five years there is “opportunity to reshape the portfolio in a cost effective way, reducing the size of the store footprint and lowering our ongoing rent roll”.

In its European business, underlying operating profit increased from £1.3m to £2.9M. Total revenue was up 3.8% to £46.3m.

Like-for-likes were flat.

Gross margins tumbled 430 basis points in the UK, largely due to a higher level of promotional activity as well as an increasing proportion of beds in the sales mix.

Carpetright said these two factors were the “most significant” causes of the decline in profitability.

Chairman and chief executive Lord Harris said: “Like many other retailers we are continuing to experience a very challenging trading environment, with significant sales volatility and a corresponding decrease in the gross margin.

“Against this backdrop, the Group has remained profitable on an underlying basis and continues to generate net cash. 

 “With the consumer environment expected to remain difficult, we are focusing on those opportunities that are under our direct control.  We have reduced our total cost base in the first half and will continue to take a determined approach to reducing this further. 

“The development of our beds business under the leadership of a new management team presents a significant growth opportunity and the imminent launch of our improved bed offer gives us confidence in improving the Group’s performance in the remainder of the year. 

“In addition, in floor coverings we will continue to offer the best prices to our customers by adapting ranges and promotional activity, whilst simultaneously working with our suppliers to reduce the level of margin investment in the second half.   

“We are confident that the combination of these factors will underpin an improved trading performance for the Group in the second half and our expectations for the year as a whole are unchanged. 

 “Although we anticipate the economic environment will remain challenging for the foreseeable future, we believe the Group is in a strong position to capitalise on a strong value offer supported by a superior service proposition, when consumer demand in our sector improves.”

Carpetright said it will focus on its five strategies to secure growth: primarily focusing on floor coverings; developing a competitive bed proposition; managing its UK store portfolio; developing its European proposition; and reaching more customers through additional channels.