Floorcovering specialist Carpetright has capped a torrid year with £70.5m of pre-tax losses.

Much of the losses were attributed to its CVA in June and restructuring costs, but UK sales were down 3.6% like-for-like.

Chief executive Wilf Walsh was confident the restructuring and associated £60m recapitalisation offers a chance to rebuild the business.

“This will be a transitional year for the group as we work through recovery plan,” he said.

Here are five ways Walsh intends to make Carpetright great again.

Cutting the legacy store portfolio

Walsh told Retail Week Carpetright’s lumbering 400-strong estate was toxic. “That is the shadow on our x-ray,” was how he put it.

The store estate has been split into three categories – A, B and C – as part of the CVA, which Carpetright is keen to point out was done with the support of landlords.

A majority of its estate – 176 trading stores and 19 warehouses – are in category A. Stores in this group average £22,500 sales per week, and individually each make a good profit. No leases are compromised under the CVA.

Category B is split into two parts. One comprises 82 stores that average sales of £13,200 per week, make a small profit but do not cover their overheads. The CVA compromise on these outlets is a 30% rent reduction for three years.

The other group is of 31 stores with average sales of £12,200 that are marginally profitable. The CVA agreement is a 50% rent reduction for three years.

The closures are focused on category C, which includes 92 locations; 81 trading stores, which are not profitable, have already been marked for closure by September 23. It also includes a warehouse and 10 closed or sublet stores.

Walsh has hinted there is “some uncertainty” about category B sites. The retailer can terminate leases on the 18-month, two-year and three-year anniversaries of the CVA.

Walsh said: “There is some real flexibility within our store portfolio over the three-year period of the CVA, which will see us get to a right-sized portfolio that is fitted properly.”

In the long-term, Carpetright aims for a portfolio of between 300 and 400 stores.

New brand identity and store refurbishments

Walsh said Carpetright’s estate has been “chronically underinvested for years” and work has already begun to make the ailing estate “fit for purpose”.

Since the end of April, 55% of the estate has traded under the new brand identity and 28 refurbishments have been completed.

The aim of the refits is to create a modern shopping environment for customers.

So far, changes have ranged from new signage and sample areas for carpets in stores that make smaller profits, to the introduction of the ‘graphite’ storefit in larger, highly profitable outlets, and in stores facing new competition.

According to the retailer’s results, the strategy is already paying off.

Refurbished stores generated like-for-like sales 9.2% higher than the remaining estate, although that dropped to 4.3% when including the stores refurbished to compete with new competition.

While the most profitable stores are currently the priority, Carpetright aims to revamp of its entire portfolio by the end of its CVA period in 2021.

Alongside the refit programme, Carpetright also aims to rebuild its reputation, which Walsh admitted has been damaged by the restructuring and the associated bad publicity the CVA has attracted.

A new customer campaign under the banner ‘Carpetright for Life’ will launch in September.

Walsh would not be drawn on the details of the new strategy but he is clear that is will signal a new direction for the retailer, and it will focus on service credentials.

He said: “What a lot of the research is saying is that value is important, but it’s the quality of the service that’s key.

“It’s a reset for us in terms of reminding people that we are an end-to-end service retailer, from doing your research online, through to a Which? trusted trader fitting your carpet and every point in between.

“But clearly there will be a price message as well because that still is important with cash-strapped consumers.”

Supporting staff and improving service

Achieving that level of service will only be possible, however, if Carpetright can rebuild its reputation with its colleagues too.

It has introduced social learning and communications platform Fuse to keep staff informed and engaged.

It has been especially important around the 81 store closures. At it stands, Carpetright has managed to redeploy 31% of the staff affected by the closures and it hopes to exceed that figure.

“We have an ongoing investment in our Fuse programme in terms of training and service,” Walsh told Retail Week. “Service is absolutely vital and we spend a lot of time and a lot of investment training colleagues in service and product knowledge as we move into hard floorings, so that is an ongoing part of our strategy.”

He acknowledges that an 8.8 Trust Pilot score is lower than some of competitors but he points out it has “10 times as many reviews” because it is the market leader.

Carpetright is “testing and retesting” customer service, and is focusing on key elements of the customer journey that will increase conversion and average transaction values.

Those key elements are interest free credit, which helps to increase transaction value; customer satisfaction and driving up key metrics, such as Which? trusted trader scores and its ‘Never Beaten on Price’ value proposition.

On the latter, that includes matching competitors’ quotes but also offering added value such as half-price underlay and an uplift and disposal service.

Moving product with the times and working with suppliers

While at the beginning of the year the restructuring took its toll on Carpetright’s supplier relationships, and some withdrew supply causing shortages, Walsh said it is “very close to getting back to normal”.

He said: “Suppliers were sort of hamstrung by credit insurance but they have been working very hard with us to ensure we get product on time and we are moving closer to our original terms with a number of suppliers.”

At 20% of the market, Walsh adds, Carpetright is important to them too. “We’ve got really good relationships with these people and the recapitalisation is good for them,” he observes.

The focus now is on getting the product mix right and meeting customer demands. Hard flooring is a trend that continues to grow in popularity and, even during its tough year, Carpetright saw the category grow by 9.2% like for like in the UK.

It is a big opportunity to grow market share, and the retailer is keen to become as famous for hard flooring as it is for carpets.

Working with suppliers, Carpetright has increased the number of products across hard flooring from vinyl to engineered wood; developed an own-label brand called Tegola; created dedicated hard wood flooring zones in stores; trained staff in hard flooring and ensured there is third-party fitting capacity, and extended the range available online.

In its core carpet business, it continues to offer products ranging from its Essential Value range to premium products.

It is extending its partnerships with a new deal with Country Life magazine and launching an own-label Soft Sensations carpet and home carpet tile proposition.

It is dialling back on beds, a category it introduced in 2009 to utilise excess store space, despite re-ranging and changing products last year.

Walsh said: “We are not top of mind for customers when it comes to bed retailing and it is now clear that a brand extension of any significant is going to be difficult to achieve.”

It will retain the Sleepright brand where store size allows as well stock other well-known bed brands.

At the budget-end of the market, it plans an Essential Value proposition as well as strengthening its sub-£500 offer.

Digital strategy

According to Walsh, this year’s crop of retail failures is in part due to those businesses not being “Amazon proof”.

He said: “Toys R Us and Maplin weren’t Amazon-proof. Everything they sell you could get delivered next day. It’s slightly different for carpets and floor coverings.”

Carptright’s new digital strategy takes a three-pronged approach that will bring improvements to its website, use of tech in-store and online service

“It’s about improving the website. We are moving to a new online platform [this year], which will drive an improved consideration of Carpetright because 85% of flooring customers do their research online,” said Walsh.

As well as trying to make its website more inspirational and easier to navigate, Carpetright will increase marketing spend on search engine optimisation, pay per click and video on demand.

These forms of marketing, it noted in its results, are overtaking traditional press consumption across all demographics.

The second aspect, according to Walsh, is targeting the new generation of people who may never want to visit a store.

He said: “We have got to provide for a generation of people who will be able to measure their own home, choose colours, textures, designs and make an order without visiting a retail shop.”

For those customers that do venture into a store, Carpetright is investing in the experience through customer service automation and personalised content and recommendations.

That will be powered by artificial intelligence and its move to the Cloud and Microsoft Dynamics 365.

“Colleagues will be able to walk around a store and build an order on an iPad with a customer, which you can’t do currently,” said Walsh.

“We anticipate improving conversion rates by being able to marry our in-store and head office systems in with the digital offer.

“We are serious about digital, even though it’s only a small part of our overall sales at the moment.”

It has been a tough year for Walsh and Carpetright, but he is confident the retailer can now make strides forward.

“We are Carpetright,” was the confident assertion with which he concluded the results.

He didn’t add ‘come and get us if you think you’re hard enough’, but the implication was that Carpetright will remain a retail fixture for years to come.