Carpetright slashes profits outlook as footfall drop hits trade
Shares in Carpetright have plunged after the retailer warned over profits following a hefty drop in sales during the crucial weeks after Christmas.
The firm was down 47% in early morning trading on the London market after reporting that like-for-like sales fell 3.6% in the 11 weeks ending January 13.
Total group sales also slid 2.3% lower, with the company pinning the blame on "reduced consumer confidence".
In response, the group slashed its profit outlook from around £13.8 million to £16.7 million, to between £2 million and £6 million.
Chief executive Wilf Walsh said the "significant deterioration" in UK trade came on the back of a positive start to the third quarter.
He said: "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.
"Our response to the threat of new competition continues to be effective, with those stores that have traded against new local competition for more than 12 months performing ahead of the rest of our estate.
"Sales in our rest of Europe business have also been volatile but we continue to deliver like-for-like sales growth, primarily reflecting the introduction of lower margin service income.
"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."
Carpetright, which has 552 stores worldwide, said UK flooring sales had slipped 1.4% and bed sales continued to struggle.
However, it booked a brighter performance across the Republic of Ireland, Holland and Belgium, where like-for-like sales grew 4.3% over the period.
Neil Wilson, market analyst at ETX Capital, said: "After a profits warning in December, in which it said it expected underlying profit before tax for the year to be at the lower end of the previous range of £13.8 million to £16.7 million, management has slashed this to a range of £2 million to £6 million.
"As we noted in December, the guidance appeared like wishful thinking and so it turned out to be the case.
"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."