CPR have already shed quite a bit of square footage, but if it can shed more of the unsustainable rents they�re stuck with through a CVA supported by Meditor and a successful Rights Issues then it�ll be a victory over Lord Harris who saddled the company with over-expansion in the first place (and is now cheekily looking to cherry-pick some of the cpr estate for his own purposes). If the sources are to be trusted, Harris has offered 25M for 100 stores (around the present market cap of CPR which has over 400 stores) which could be viewed as an admission that the current market cap of CPR is much too low and should be at least 4X the present price. Once CPR have shed the rest of the loss-making stores, the pound gains ground, consumer sentiment recovers and competitors continue to lose money then the recovery could be spectacular.
The fact was that carpetright under Wilf Walsh were recovering quite well until the Brexit vote came. The company was investing in its IT systems and customer service and driving sales and profits; it continues to do so in very testing times for all retailers. Brexit introduced massive consumer uncertainty and a weak pound, squeezing cpr�s margins as it sources its materials in Euros - these are the main causes of the likely loss this full year, but they are cyclical issues that should ease once the PM sorts out the Brexit confusion. Then the margins will expand and profits should recover to pre-Brexit levels and beyond. The idea that Carpetright has no idea about customer service is simply not true, it is one of the foundations the pre-Brexit recover based. If cpr are no cheaper than competitors its because they are trying to avoid selling their products at a loss, but they are cost competitive and have a countrywide coverage that makes them the leader in their field. Speaking of anecdotes, which are of limited value to the analytical investor, I have had good experiences at Carpetright. They�ve taken care of the entire carpet-fitting process and I�ve been happy to pay a little extra for the service. Times are tough, but cpr seem the strongest in the field. Its competitors are more likely to fold before it does and it potentially stands to gain even more market share.
The company�s looking to have a shocking full year, but find it hard to understand the excessive doom-mongering. Its clear that Brexit and consumer sentiment will ravage Carpetright�s full-year results, but its something being felt across the entire retail sector, not just cpr. Crucially, cpr�s debt is under control, they�ve been downsizing their estate for some time and have re-vamped a large portion of the remaining estate in view of fresh competition (which will also be suffering from the same headwinds), and so they�re well-placed to weather the storm unlike Toys, Maplin etc etc. Much negative talk about Carpetright�s customer service, but the evidence (online verified reviews, investment in staff training etc) suggests that the company has drastically improved on that front in recent years in the face of increasing customer expectations and price consciousness. Once the pound recovers agains the euro and people start buying carpets and beds again, the cpr share price should be back around 250p, a much more sensible valuation.
Bought into this share after the first big drop at about 130p and just averaged down at 66p. Can't believe it halved not once but twice, due the same bad news...madness! See fair value here around the 230p mark; not one for the emotional investor though this one....