Carpetright is downsizing 10% of its portfolio as it seeks to get better returns from its selling space.
The floorings giant said it wants to downsize its stores sized between 12,000 sq ft and 14,000 sq ft - which make up about a tenth of its 584-strong portfolio - to an optimum size of about 8,000 sq ft to 9,000 sq ft.
Founder and chairman Lord Harris said Carpetright would be downsizing six stores next year and a total of 92 stores have leases due to expire within the next five years that will “provide opportunities to achieve lower net rental costs”.
He told Retail Week Carpetright could generate the same turnover from a smaller selling space.
“We are over spaced,” he said. “20 years ago we couldn’t get space and we took whatever space was available.”
Harris could not give a definitive time frame for the downsizing due to the uncertain economic outlook. He added that he would “rather the landlord took the space back” than sublet to other retailers.
Harris said Carpetright’s online business was “going very well”, adding: “It will probably be more important than more stores in the next five years.”
The retailer revealed group underlying pretax profit of £10m in the 26 weeks to October 30, down from £13.9m and broadly in line with analyst expectations.
Total group revenue fell from £258m to £248m, while UK and Republic of Ireland like-for-likes fell 6.1%, as it suffered from a low level of housing transactions.
Harris said the floorings market was “very difficult at the moment”, and that profits took a hit due to the reduction in sales and the retailer’s large cost base. “We’re down but the market is down more than we are,” said Harris.
He indicated Carpetright was still taking share from rivals. According to Retail Week Knowledge Bank, Carpetright, the UK’s leading floorcoverings retailer, has a share of about 30%.
Bill Gates’ Cascade Investment vehicle increased its stake in Carpetright to 6% on Monday. The Microsoft-founder originally acquired a 3% stake in 2008.
He said next year would be “tough” but that he’d be “very disappointed” if Carpetright didn’t see a sales rise in the first three months of next year. “We’re up against weak comparables,” he said.