Carpetright reports strong recovery in UK sales

Carpetright boss Wilf Walsh has taken just one year to turnaround the previously struggling flooring specialist by taking the company upmarket and solving its famously poor customer service.

As a result, the company posted pre-tax profits of £6.6million for the year to May 2 boosted by a strong recovery in UK sales and a return to profitability on the Continent. The company's group revenue rose 3.3 per cent to £462.6million.

A year ago the edge-of-town carpet seller, which was set up by Conservative peer Lord Harris of Peckham in 1988, posted a loss of £7.2million following a series of profit warnings.

Under Walsh the Essex-based group, which has 459 UK stores, has moved its focus to a more contemporary market and attempted to move away from being seen as a discount carpet seller, with plans to also change its logo.

Walsh, who replaced the 72-year-old Harris in the top job last July, also unveiled further details of a strategic plan first sketched out at the time of the group's interim results in December.

Walsh said: 'While this is just the beginning of the journey to transform Carpetright, we have a clear direction.'

Shares in Carpetright jumped 4 per cent higher on the results, up 19.5p ot 609.0p in late morning trade.

Freddie George, retail analyst at Cantor Fitzgerald, said: 'It is clear the new management was fully aware of the measures needed to restructure the business - the poorly perceived service, the dated look of the fascia, the concept being too focused on price and not aspirational enough for mainstream customer needs.'

However George was also cautious about the outlook for the future, retaining a hold rating on the stock.

He added: We are concerned that the company has seen a significant one off benefit in its like for like sales from the launch of its interest free credit offer.

'There will also, in our view, be some impact from the Martin Harris’ new retail concept, Tapi. He is the son of Carpetright’s founder, Lord P Harris. The plans are to develop of up to 200 Tapi stores in the UK.'

Walsh, the former managing director of gambling group Coral, was a relative unknown when he took over from Harris last year.

Prior to Walsh, Carpetright had gone through a string of failed appointments.

Back in 2013 former Sainsbury's executive, Darren Shapland, quit as boss after just 17 months. It was believed he clashed heavily and disagreed with founder Harris.

Walsh said the company will continue to take advantage of expiring property leases to further shrink its store estate in terms of square footage, though it may retain the same number of outlets. Last year it opened 12 stores in the UK and shut 24.

The company booked a £7million charge for lossmaking stores as a result of the strategic review, reducing statutory pre-tax profit to £6.6million.

Management will also seek to revitalise the Carpetright brand with advertising campaigns 'dramatically different in style and message from the predominately price-led theme adopted historically'.

Carpetright recently opened a 'concept store' in Clapham, south London, to test out a more modern design and layout on customers.

Like-for-like sales rose 7.3 per cent in the UK after falling 0.2 per cent in the previous year.

The firm also reported an encouraging start to the new financial year in the eight weeks to June 27, with like with like-for-like sales ahead by 4.9 per cent in the UK and 7.4 per cent in the rest of Europe, on a local currency basis.

Meanwhile, the European business returned to profit as its same-store sales stabilised.

Source : Mark Shapland - ThisIsMoney.co.uk
www.thisismoney.co.uk/money/markets/article-3144303/Turnaround-strategy-Carpetright-boss-Wilf-Walsh-pays-firm-swings-healthy-profit.html