Carpetright makes sixth profits warning

The company said underlying pre-tax profits will be below market expectations as discounting to help drive sales hits its profit margin.

Chairman and chief executive Philip Harris said: “With sales volatility continuing to impact on the pace of margin improvement, we expect underlying pre-tax profits for the full year will be slightly below the lower end of the current range of market expectations.”

Lord Harris, whose family own around a quarter of the company, said tough trading conditions had persisted throughout its third quarter with consumer confidence fragile.

“Looking forward, I see no respite from the challenging environment over the next 12 months,” he said.

Carpetright has been particularly hard hit due to the stagnant housing market and because carpets are a discretionary purchase.

The company has responded by lowering prices, expanding into beds, upgrading its range of laminate flooring and cutting costs. It expects to cut costs this year by £5m compared with the year before.

Carpetright said like-for-like UK sales were down 0.5 per cent in the 12 weeks to January 21, its fiscal third quarter, compared to a second quarter fall of three per cent.

Seymour Pierce analyst Freddie George said: “There will be a lot of disappointment with these figures. The big ticket, housing related markets, continue to struggle with the housing market in its fourth year of weak transaction numbers.”

Carpetright said its gross profit margin fell by 430 basis points in the first half. It expects a decline of around 300 basis points in the second half as it continues to cut prices to drive sales growth.