Carpetright shares have crashed by up to 50 % following the store issued a surprise profit warning and blamed a decrease in consumer confidence for sales cratering.
The flooring chain’s harsh update pulled its stock lower up to 45pc to 90p and knocked shares in other furniture and DIY groups lower as spooked investors fretted that customers might be delaying paying for big-ticket products.
Shares in B&Q owner Kingfisher fell 3.5pc to 331.3p, sofa store DFS lost 3.8pc to 198.2p, and smaller sized rival SCS dropped 4.9pc to 212p in mid-morning buying and selling.
Carpetright’s second profit warning in under two several weeks is especially painful for investors who’d recently been told in December to lessen their profit expectations.
Analysts at Peel Search stated that although Carpetright had blamed the broader consumer outlook, the City has “seen solid sales elsewhere (Topps & Headlam) and you will find aspects of Carpetright-specific issues, most particularly the entire re-varying from the bed offer in front of peak [buying and selling]”.
The organization, that has 416 shops within the United kingdom and 136 in Europe, stated that there was a “sharp deterioration” in do business with sales in shops open at least a year slumping by 3.6pc within the 11 days to The month of january 13. Total sales dropped 4.5pc after it closed 10 stores.
The publish-Christmas period was “considerably behind expectations” with “lower customer footfall”, Carpetright stated. This had led to a “significant effect on profitability and our outlook for that indication of the season”.
Consequently Carpetright has slashed profit forecasts to between £2m and £6m, well below City expectations of £16.5m. The store includes a lengthy good reputation for profit warnings, issuing its first in 2003 and a minimum of nine more during the last fifteen years.
Wilf Walsh, leader, stated: “Despite an optimistic begin to our third quarter, we view a substantial degeneration in United kingdom buying and selling throughout the important publish-Christmas buying and selling period. While average transaction values were up every year, the amount of customer transactions since Christmas was dramatically lower, which we feel is suggestive of reduced consumer confidence.”
Like-for-like sales in the core flooring business, which in fact had formerly been performing well, sank 7.1pc within the publish Christmas period.
There is a rather better picture in the European business, where it’s shops within the Netherlands, Belgium and also the Republic of eire like-for-like sales for the reason that division rose 4.3pc throughout the third quarter.
In December Carpetright blamed “fragile” consumer confidence and “intensified competition” for any collapse in two-year profits, which fell 93pc to simply £300,000. At that time it blamed greater staff costs and discounting for that hit to the main point here. In October it cautioned that first-half buying and selling was “volatile”, with floor sales neglecting to offset declining interest in its beds.
“It’s the same kind of story just like other brands which have unsuccessful to adjust to altering consumer trends – lower footfall leaves transaction figures lower considerably from this past year,” stated Neil Wilson of ETX Capital. “We have to also consider less strong consumer sentiment for giant ticket products like a factor, in addition to tougher competition from the more diverse marketplace.”