Carpetright has become the latest UK retailer to issue a post-Christmas profit warning, its second in as many months, blaming a “sharp deterioration” in trade.
Shares in the specialist carpet and floor coverings retailer slumped 48% an hour after the company said it had adjusted its full year outlook because of a slump in demand during its sales season since Boxing Day.
Shares in competitors including Next, DFS and Kingfisher, which owns B&Q, also fell back but far less sharply as investors reacted to the dire numbers from Carpetright.
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It reported a like-for-like sales decline of 3.6% in the 11 weeks to 13 January – adding that transaction numbers were down “significantly” with core flooring sales down 7.1% since Christmas on the same basis.
Carpetright said it was now forecasting underlying pre-tax profits of between £2m-£6m for the year to 28 April.
That was significantly below market expectations of £13m to £15.6m.
The firm, whose fortunes are usually closely tied to the health of the housing market, made £14.1m in its previous financial year.
Carpetright issued its statement following a festive season that has seen mixed fortunes for many big names.
Debenhams and Mothercare have also issued profit warnings.
Image: Mothercare chose not to discount in the run-up to Christmas
Analysts had predicted trading would be tough – despite discounting – given the squeeze on household budgets from Brexit-linked inflation outpacing wage growth.
Carpetright signalled that its price reductions after Christmas had failed to lure shoppers into its 416 UK stores.
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Chief executive Wilf Walsh said: “Despite a positive start to our third quarter, we have seen a significant deterioration in UK trading during the important post-Christmas trading period.
Image: Wilf Walsh took over as chief executive of Carpetright in 2014
“While average transaction values were up year on year, the number of customer transactions since Christmas was sharply down, which we believe is indicative of reduced consumer confidence.”
He added; “The severity of the decline in footfall over this key trading period and our more cautious view of the outlook for the balance of the year leads to a significant reduction in our full year expectations.
“Against this background of a further deterioration in market conditions, we remain committed to driving throughthe improvements that are essential to the long term repositioning of the business.”
Neil Wilson, senior market analyst at ETX Capital, described the performance as a “shocker”.
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“Again it’s the same old story as with other brands that have failed to adapt to changing consumer trends – lower footfall has left transaction numbers down significantly from last year.
“We must also consider weaker consumer sentiment for big ticket items as a factor, as well tougher competition from a more diverse marketplace,” he said.