Carpetright issued a profits warning today. The City debates whether this is illustrative of a tough market or a Carpetright specific problem.
“The company has put out yet another profit warning. Results have been affected by weaker than expected performance in the UK, which, as yet, has not seen any benefit from the housing market. They have also been impacted by poor figures in Holland.
We continue to believe that the company’s conforming format is not effective enough against the independents. It is too focused on price, in our view, and not aspirational enough for mainstream customers. In the meantime, even with some measure of operational gearing in the earnings over the next three years, the stock remains very highly rated.” - Freddie George, Cantor
“We maintain our view that Carpetright is suffering from company specific issues in terms of an over-spaced and over-rented store portfolio as well as strong competition from the independent segment. There is little timely market data to back up this view, but the 11% Q2 LFL sales reported by Topps Tiles yesterday, combined with broader market commentary, suggests that the improvement in the housing market has started to feed through to the broader retail sector.” - Sanjay Vidyarthi, Liberum
“Carpetright has reported an unscheduled trading update this morning covering the 8 weeks to 22nd March (Q4 to date). Back in late January the group reported that UK LFLs had risen by 1.9%, an improvement on the 0.2% reported over Q2. Going into Q4 management had expected to see a further improvement in trading as UK housing transaction volumes improved. Unfortunately this has not been the case and LFLs in the UK over the recent 8 weeks have increased by a mere 0.2% (+0.9% ex wholesale). Our model had assumed growth of 2.0% for Q4. This is clearly a disappointing outcome and leaves a shortfall compared to expectations for the full year. The self-help initiatives continue to progress (e.g. store refurbs, range development in Beds and Laminate, and a push on service) however these have not been strong enough to offset reduced customer visits and conversion.” - Mark Photiades, N1 Singer
“Despite the upbeat trading update from Topps Tiles yesterday, UK consumers are not rushing to replace their carpets (despite the recent flooding!), whilst Holland is still very difficult, and poor old Carpetright has therefore had to issue yet another profit warning…UK LFL sales have been only up by 0.9% LFL in the last 8 weeks, so Carpetright has been forced to conclude that full-year PBT for y/e April will be only £3.5m-£5.5m.” – Nick Bubb, independent analyst