Carpetright floored by Panmure note

Carpetright fell as the market assessed yesterday's threadbare trading figures that management reported as 'meeting expectations', but which had Panmure Gordon issuing a 'sell' note and giving a price target of 400p.

In a biting note, Philip Dorgan, an analyst at Panmure Gordon, wrote: "We are slightly surprised to see that UK second quarter like-for-like sales growth slowed from quarter one, given kitten soft comparables. However, gross margin guidance is retained and, despite a marked deterioration in the Netherlands, we don't expect that consensus forecasts will change. We remain sellers, because it will be a while before profits catch up with the valuation (66.2x prospective earnings)."

On October 16th, in a trading update for the 12 weeks ended October 13th, Carpetright announced that like-for-like sales in the UK increased by 0.6%, although total sales in the UK declined by 0.6% due to the reduction in the number of stores year-on-year.

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In the rest of Europe (Netherlands, Belgium and the Republic of Ireland), total sales declined by 12.2%.

Chief Executive Darren Shapland said: "Gross margin for the period continued to improve in line with our previously announced expectations and our guidance of a full year gross margin improvement in the range of 200-250 basis points above the prior year, remains unchanged. The majority of this margin improvement will be realised in the first half, as we annualise the margin improvement measures implemented in the second half of last year."

The group will report its interim results for the first half of its financial year on December 11th 2012.

Consensus forecasts for the full year ending April 30th 2013 are for pre-tax profits of £9.34m (2012: £13.50m) on turnover of £466.80m (2012:£471.50).

CM