United may shut down more stores

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UNITED Carpets is looking at closing more stores this year as it struggles to cope with the economic slump and the eurozone crisis.

The Rotherham-based floor coverings group said it has been forced to “terminate” a number of franchises over the past few months and it will review a number of stores to see if they are viable.

The group declined to say how many stores have been closed or how many are under review.

It currently has 85 stores, including 68 franchise and 17 which are owned by the company.

A spokesman said that when a store franchise is terminated, the company can either put in a new franchisee to run the store, it can run it itself or it can close the store.

It declined to say which options have been used over the past few months or which options will be used in the future.

It added that closing stores will be an option.

United said its performance is likely to be hit by the contract terminations and said it is proving “increasingly challenging” to turn around failing stores. “The difficult market environment, uncertainty surrounding the economic recovery and the outlook for Europe has continued,” the company said in a statement.

“As a consequence, apart from occasional, short-lived, promotion-led activity, trading for retailers generally and for ‘big ticket’ retailers in particular has been extremely challenging.”

United said this has meant a “significant proportion” of its franchise network is struggling, “with particular issues in meeting their liabilities to creditors and the group”.

The company said the problems come despite its considerable investment in technology, changes to management and substantial financial support.

The carpets, rugs and beds retailer said the purpose of any rationalisation would be to meet the more stringent criteria needed to “prevent an accumulation of poorly performing stores creating an unsustainable financial burden on the group”.

United believes the review’s impact could be material, but said the continuing core sites should be able to operate successful- ly.

It will announce the outcome in late August.

Analyst Freddie George, at Seymour Pierce, said: “The company has put out a cautionary trading update, stating that the difficult market environment has had a marked impact on the franchise network.

“Although we believe group like-for-like sales have remained positive since the end of March, a number of the company’s franchise outlets have seen a marked deterioration in their performance over the last quarter,” he added.

Analysts at Singer Capital Markets said in a note: “United Carpets has issued some very weak comments about current trading indicating that they are going to have to terminate a lot of franchise stores in the current year which can’t operate in these con-ditions.