Carpetright shares floored as high street woes mount

Retailer Carpetright saw shares tumble into the red after its second profits warning since Christmas as the crisis on the high street deepens.

The firm's shares plunged by nearly a quarter after it said it was set to swing to a full-year loss and had started talks with its lenders to ensure it does not breach the terms of its bank loans.

It said trading has remained under pressure, with like-for-like sales still falling despite a small improvement since January.

Carpetright is now looking at options to speed up a trading turnaround, although it said plans were at an "early stage".

Toys R Us
Toys R Us

The warning comes after a "Black Wednesday" for the high street, following the collapses of Toys R Us and Maplin, which have put more than 5,000 jobs at risk.

New Look and Prezzo are among other high street firms looking to close stores in a dire start to 2018.

Carpetright said: "Although the important Easter trading period is still to come, UK like-for-like sales remain below management expectations and the group now expects to report a small underlying pre-tax loss for the year ending 28 April 2018."

The company said its lenders had signalled they remain "fully supportive".

Carpetright sparked a shares crash in January when it warned over profits and said like-for-like UK sales had fallen 3.6% in the 11 weeks ending January 13 - its crucial Christmas trading period.

It had earlier warned over the full-year outlook in December.

The chain has blamed weak consumer confidence for the sales woes, which it said has continued since the start of the year.

Carpetright stock
Carpetright stock

The group has 416 stores in the UK and 552 worldwide.

It has already been refurbishing its estate in the UK as part of a turnaround strategy and looking to offload loss-making stores, which have been dragging on the wider performance of the firm.

But, in its latest update, the group said there was a brighter outlook for its international arm, with trading in the rest of Europe improving, led by a recovery in like-for-like sales in the Netherlands.

Neil Wilson, senior market analyst at ETX Capital, said it was a "bad week for retail as Carpetright's woes get worse".

He added: "Weaker consumer sentiment for big-ticket items is a factor, as well as tougher competition from a more diverse marketplace.

"Meanwhile, the slowdown in the property market means people are moving less often and therefore upgrading soft furnishings less often - the less often people move, the less often they purchase a new carpet.

"Carpetright is also a business that probably hasn't quite adapted to the changing retail landscape quite as fast as it might."