Carpetright swings to full-year loss amid restructuring

Beleaguered flooring retailer Carpetright said on Tuesday that it swung to a full-year loss as it took a hit from restructuring costs and bad publicity.

In the year to 28 April, the company swung to a pre-tax statutory loss of £70.5m from a profit of £900,000 in 2017 as group revenue slipped 3% to £443.8m and net debt rose to £53m from £9.8m. The company said there were £61.8m of exceptional items versus £13.5m last year.

Like-for-like sales fell 3.6% during the year in "tough" trading conditions, compared to a 0.5% drop a year earlier, with a 7.8% decline in the second half.

On an underlying basis, the company made a pre-tax loss of £8.7m versus a profit of £14.4m, broadly in line with the £7m to £9m loss the company said it expected to register in April. Meanwhile, underlying earnings before interest, taxes, depreciation and amortisation fell to £6.4m from £28.6m a year ago on the back of lower revenue, a reduced gross margin and higher expenses.

The margin was hit by higher product costs in the UK as the pound weakened against the euro, promotional measures taken to address competition and "the inevitable disruption to trade resulting from the adverse publicity surrounding the restructuring".

Carpetright said that as expected, trading in the first eight weeks of the new financial year was heavily impacted by disruption from the company’s restructuring activity, in particular stock shortages as some suppliers had withdrawn supply and the period of exceptionally warm weather.

In more recent weeks, following the approval of the company voluntary arrangement and completion of the recapitalisation, the group has begun to see the benefits of stock replenishment by suppliers and less negative publicity, although UK like-for-like sales remained negative.

Carpetright announced back in April that it plans to shut 92 stores as part of a CVA and it said on Tuesday that it will close 81 stores by September.

Chief executive Wilf Walsh said: "After a difficult trading year impacted by reduced consumer spend, increased competition and the legacy of an unsustainable, over rented store portfolio - the CVA and recapitalisation offers us the chance to rebuild Carpetright which remains the clear market leader in floor coverings with outstanding consumer brand awareness. This will be a transitional year for the group as we work through our recovery plan."

At 0910 BST, the shares were down 1.7% to 29.50p.