Carpetright; what the analysts are saying regarding the flooring giant’s sixth profit warning since February 2011.

Panmure analyst Philip Dorgan

“Yet another profit warning from Carpetright, signalling yet again that the consumer is deferring non-essential, non-exciting purchases. While management is controlling costs well, this is not enough, while the move into beds is proving a double edged sword. We expect forecasts for FY2013 to fall considerably, possibly to around £9m pretax.

“Carpetright’s recovery has not panned out as expected, primarily because the consumer recession has been deeper and more prolonged than expected.”

 

Conlumino managing director Neil Saunders

“The downturn has hit the UK floorcoverings market hard with total sales contracting by over a third since the onset of recession in 2008. It is against this backdrop that Carpetright’s performance needs to be judged; and, on balance, the assessment is a positive one.

“The business has been well managed from both a financial and strategic perspective. On the latter point, initiatives to boost sales have included broadening the floorcoverings offer to include more popular laminate products, refurbishing stores, and a revitalised bed offer. With like-for-like sales now moving into positive territory there are signs that these plans are starting to paying dividends.

“The diversification into beds was established some time ago but the latest results are disappointing, especially in light of the recent refresh of the range.

“Overall, we remain convinced of Carpetright’s general strategy and approach and believe that performance should continue to pick up over the near term with some better numbers coming in 2012/13 as the housing market and economy move more firmly into growth.”

 

Seymour Pierce analyst Freddie George

“It is yet another profit warning from the company and there must be concerns that the decline in profitability over the last five years is partly structural and not all down to the market.

“Following this update, we are downgrading our FY12 pre-tax profit forecast from £7m to £3.5m

“Carpetright might be the dominant multiple but it appears it is not picking up market share from the independents and in our view, is too much focused on price rather than value for money and service. The loss of insurance business is also a concern. The company is operationally geared but when the recovery does eventually come, the bounce back in earnings might not be as strong as expected.”

 

Nick Bubb, independent analyst

“Another day, another Carpetright profit warning. Ironically, today’s pre-close includes a modest bounce of 1.4% in like-for-like sales in the core carpets business.

“The damage is done by poor sales of beds and a downturn in the carpet chain in Holland and Belgium. Despite better than feared UK margins, Carpetright have warned that full-year pretax profit will be just £3-4m, another big miss on expectations and way down on what they made last year.

“Things actually seem to be going from bad to worse, despite the benefit of the effective demise of its biggest UK competitor, Allied Carpets.

“With hindsight, the bed market looks an even more deferrable area of spending as carpets.”

 

Peel Hunt analyst John Stevenson

“While bed sales were up marginally year-on-year, this was below plan following the launch of new ranges at the end of 2011, although gross margin levels have been raised by 700bps as expected.

“The negative drag on UK like-for-like sales was the collapse in insurance sales, representing about 3% of Q4 sales but down about 50% year-on-year.

“While we expect insurance sales to pick up again in the new financial year, structural changes in this market will limit future upside. While the core UK sales performance is showing signs of stability, short term forecast risk is now shifting to international and the insurance business.”