Carpetright crashes on reports of store closures

Carpetright shares tumbled on Monday following a report over the weekend that the company is preparing to close stores and cut jobs in a bid to avert administration.

According to the Sunday Telegraph, the chain is planning to close some of its 440-strong store estate through a voluntary arrangement, a restructuring scheme that allows businesses with too many outlets to exit some and negotiate cheaper rents on others. Meanwhile, City AM said Carpetright has brought in Deloitte to look at a range of fundraising options.

Shares in the floor coverings retailer crashed back in January as it downgraded its full-year profit guidance to between £2m and £6m compared with analyst expectations of around £14m after the Christmas trading period turned out to be much worse than forecast.

Earlier this month, the retailer warned that it expected to make a small underlying pre-tax loss for the year ending 28 April 2018 as market conditions remained difficult and like-for-like sales continued to undershoot management expectations. The group said at the time that it was exploring a range of options to accelerate the turnaround of the business and strengthen the balance sheet.

It also said that it had begun constructive discussions with its bank lenders to make sure it didn't breach its loan terms.

Neil Wilson, senior market analyst at ETX Capital, said that while things are not looking good for Carpetright, it seemed "clear enough" to him from the 1 March statement that stores would close and there would be a potential cash call.

The news comes at a tough time for the UK high street, with Maplin and Toys R Us going into administration at the end of last month and New Look announcing the closure of up to 60 stores at the start of March.

"The sector's in a big mess and there will be more to go down the swanny," said Wilson.

At 1510 GMT, the shares were down 14% to 47.98p.