Profit slump not as bad as feared at Carpetright

Flooring specialist Carpetright saw a 3.9% drop in revenue in the half year to 29 October, contributing to a significant fall in underlying profit before tax.

Hit by a challenging trading environment, revenues dropped from £248m to £238.4m, with underlying pre-tax profit down from £10m to £1.4m, equivalent to earnings per share (EPS) of 1.2p (2010: 10.7p). The performance was marginally ahead of the expectations of broker Singer Capital Markets, which had forecast underlying profit before tax of £1.2m, and EPS of 1.2p.

In statutory figures, the firm made a loss before tax of £0.8m, compared to a profit of £9.8m the same period the previous year.

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In the UK, like-for-like sales were down 2.4%, although this was offset by a 4.2% reduction in costs, helped by a reduction in the number of UK stores to 503.

Gross margin reduced by 430 basis points (4.3 percentage points) to 58.0%, reflecting higher levels of promotional discount and increasing proportion of beds in the sales mix.

Chairman and chief Executive Lord Harris of Peckham said: "Like many other retailers we are continuing to experience a very challenging trading environment, with significant sales volatility and a corresponding decrease in the gross margin. Against this backdrop, the group has remained profitable on an underlying basis and continues to generate net cash.

"With the consumer environment expected to remain difficult, we are focusing on those opportunities that are under our direct control. We have reduced our total cost base in the first half and will continue to take a determined approach to reducing this further.

"We are confident that the combination of these factors will underpin an improved trading performance for the group in the second half and our expectations for the year as a whole are unchanged."

During the period net debt was reduced by £10.7m to £55m.

NR