Carpetright’s UK underlying operating profit slumped from £17.8m to £2.8m last year as weak consumer confidence undermined performance.
The profit plunge was in line with expectations after the floorings giant issued several profit warnings in the year.
UK revenues slid 3.8% to £381.6m in the year to April 28. Like-for-likes were down 0.2% as a strong second half performance, when comparable-store sales rose 1.9% offset a weaker first half when they declined 2.4%.
Group underlying pretax profit plummeted from £16.9m to £4m as the retailer invested in more promotional activity to meet customer demands for better value.
Total group turnover fell 3.1% to £471.5. Net debt reduced by £46.6m to £19.1m which was “significantly better than previous guidance”, said Carpetright.
The retailer shuttered 49 UK stores in the year, bringing its count to 490. It said a further 88 leases that are coming up for renewal in the next five years provide a “natural opportunity to further reshape the portfolio in a cost effective way”. Carpetright said a reduced portfolio reflects the growing numbers of shoppers using the website to purchase as well as research.
Carpetright chairman Lord Harris said: “Last year I said I expected the coming year would be challenging, with an extended period of economic uncertainty and fragile consumer confidence, and this proved to be the case. As a result, the group faced difficult trading conditions leading to a reduction in sales volume, but we remain profitable and continue to generate strong operating cash flows.”
Darren Shapland, the former Sainsbury’s and Carpetright finance director who was appointed Carpetright chief executive earlier this year, said: “I am excited to have joined Carpetright as its chief executive.
“Whilst it has been seven years since I was previously in an executive role here, Carpetright is a business I know well. Notwithstanding the on-going challenges of the difficult consumer environment, I have been encouraged by what I have seen so far in the six weeks since becoming chief executive.”
Carpetright said: “While it is far too early to call the beginnings of a broader recovery, this performance gives some cause for optimism on the core UK floor coverings business. We have established a £23m revenue bed business in just three years and believe there is significant scope for us to grow this further, as we continue to develop the range, improve the proposition and introduce beds to more stores.
“In the Rest of Europe, we expect the economic conditions will remain challenging.
“Against this backdrop, we will continue to drive the business towards long term growth by focusing on improving our product ranges and services, growing margins, focusing on cost reduction, reducing debt and promoting the reach of our brand.
“As a consequence, we believe the Group is well placed 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 five strategies for long term sustainable growth:
1. Improving and developing flooring product ranges and services.
2. Developing the bed proposition.
3. Managing and investing in the store portfolio.
4. Reaching more customers through additional channels.
5. Ongoing focus on cost control and cash management.