Carpetright issues full-year profit warning

published 31 January 2012

Carpet and floor coverings retailer Carpetright has warned that full-year underlying pre-tax profit is expected to be below the lower end of forecasts "based on the current pace of sales and margin improvement".

Group sales fell 3.8% in the 12 weeks ended January 21st (fiscal third quarter), more or less in line with the rate of decline seen in the first half, as falling UK sales (-4.8%) offset growth in Rest of Europe (+1.1%).

"Tough trading conditions in the UK persisted in the third quarter of our financial year with fragile consumer confidence producing a difficult floor coverings market," said Chairman and Chief Executive Lord Harris of Peckham.

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The gross profit margin declined by 430 basis points (bp) in the first half, and while this is expected to moderate to around a 300bp fall in the second, it is slightly down on the group's previous estimate "reflecting the continued need to drive value for the consumer to maintain sales momentum".

While the firm said that the full-year performance depends on trading in the fourth quarter, in which it will meet weak comparatives, it warned that with sales volatility continuing to impact margins, "predicting the final outcome for the year with any accuracy is difficult".

"Looking forward, I see no respite from the challenging environment over the next 12 months but remain confident the group will emerge in a strong position to deliver future growth once consumer demand improves," Harris said.