Shoppers in North putting off big ticket purchases

Retailer Carpetright reported a North/South divide yesterday with shoppers in the North, where there is a higher proportion of public sector workers, postponing unnecessary big ticket purchases.

The group's overall UK like-for-like sales fell by 6.1 per cent in the six months to October 30, but in the North the decline has been as much as seven to eight per cent.

The flooring chain reported a 28 per cent drop in half-year profits.

The company, which has 30 stores in Yorkshire, said it remains cautious about conditions over the rest of this financial year and into 2011 after half year sales fell four per cent to 248m.

Despite the slide in underlying profits to 10m, chairman and chief executive Lord Harris of Peckham said Carpetright is in a strong position to deliver sales growth when consumer demand returns.

But he said there are no signs of customers buying carpets ahead of the VAT rise next month.

"What normally happens is people say: 'We haven't had a holiday, we haven't bought a car and we're not moving house so we'll buy a carpet', but that hasn't happened yet."

As well as fragile consumer confidence, Carpetright said sales of big ticket, housing related items have been hit by a low level of mortgage approvals.

UK mortgage approvals, which are a key lead indicator for Carpetright, fell to 30,766 in October, their lowest monthly level in more than one and a half years.

Carpetright's finance director Neil Page said: "The availability of mortgages, particularly for first time buyers, is significantly different from what it was three years ago (with people) needing a much higher level of deposit.

"I think that's having a knock-on impact through the rest of the housing chain at the moment."

Matthew McEachran, a retail analyst at Singer Capital Markets, said the figures are in line with expectations, although he highlighted concerns about the impact of recent weather conditions on trading figures.

"We expect the snow to have had an adverse effect in recent weeks and whether or not this can be clawed back over the peak trading season remains to be seen," he said.

With more snow on the way by the end of this week, many retailers are worried that the bad weather has put shoppers off during the all-important Christmas trading period.

Mr Page said he is concerned that the country's prolonged cold snap could hit third-quarter trade.

"If we have Arctic conditions for six to 10 weeks, I'm sure it will impact consumer demand. But it won't just impact Carpetright it will impact the whole of retail," he said.

Total revenues in the UK and Ireland declined by 2.7 per cent to 207.6m.

Underlying operating profits in the UK and Ireland fell by a third to 9.6m.

The company, which opened 17 new stores and closed 19 sites in the UK and Ireland during the half year, said there are still opportunities to open more stores, particularly in densely populated areas.

It has continued to roll out beds company Sleepright, which now trades from 176 Carpetright stores after the addition of 48 sites in the half year.

The group's shares closed down 1.8 per cent last night, a fall of 14p to 782p.

Prior to yesterday's update the stock had lost 14 per cent of its value over the past six months, underperforming an eight per cent rise in the UK general retail sector.

Bill Gates, the founder of Microsoft and the richest person in the US, increased his stake in the company to six per cent late on Monday.

While Mr Page welcomed Gates upping his holding, Nick Bubb, analyst at Arden Partners, said it showed "some people have more money than sense".

The firm, which ended the period with net debt of 58.5m, maintained its interim dividend of 8.0p.

A leader in floor coverings

Carpetright, the country's biggest floor coverings retailer, runs 584 stores in the UK and Ireland and 118 in The Netherlands and Belgium.

The company is Europe's leading specialist floor covering retailer, selling a wide range of carpets, rugs, vinyls and laminates together with associated accessories.

The group's product offering was extended to selling beds in the UK following the acquisition of Sleepright in December 2008.

Carpetright said that it is continuing to win market share from smaller rivals. Carpetright was founded by Lord Harris in 1988 with the first store in Canning Town, London operating from a central warehouse in Barking, Essex.