25 Oct 2011 07:00
Embargoed until 7am, 25 October 2011
25 October 2011
Carpetright plc
Pre-close Trading Update
Carpetright plc, Europe's leading specialist carpet and floor coverings retailer, today announces a trading update for the 12 weeks ended 22 October 2011.
Highlights
·; Group sales1 declined by 5.2%.
·; The Group's store base has decreased by 11 to 643 stores.
·; Sales in the UK declined by 6.8%, with like-for-like sales2 down 3.0%.
·; In local currency terms, total sales in Rest of Europe (The Netherlands, Belgium and the Republic of Ireland) decreased by 1.8% with like-for-like sales down 1.7%. After allowing for the movement in exchange rates, this translates to a total sales increase of 2.9%.
·; Full year underlying pre-tax profits expected to be at the lower end of current expectations5.
| 12 weeks to 22 October 2011
| 25 weeks to 22 October 2011
|
Group Sales | (5.2%) | (3.9%) |
UK | ||
- Total | (6.8%) | (5.4%) |
- Like-for-like | (3.0%) | (2.2%) |
Rest of Europe | ||
- Total (in GBP) | 2.9% | 2.6% |
- Total (in local currency) | (1.8%) | (1.8%) |
- Like-for-like (in local currency) | (1.7%) | (1.4%) |
Lord Harris of Peckham, Chairman and Chief Executive, said:
"As I have said previously, like many other retailers we expect the challenging trading environment across Europe will continue for the rest of our financial year. This view is reflected in the update announced today.
"In the UK, like-for-like sales performance has been volatile, with sales volumes closely linked to periods when there has been a higher level of promotional discount. This factor, alongside an increasing proportion of beds in the sales mix, will dilute the gross margin by around 400 basis points in the first half compared to the prior year, with a corresponding impact on first half profitability. To partially offset this, we continue to take a determined approach to reducing our cost base and expect this to be down by approximately £4m.
In this fragile market, we remain focused on self-help measures. We have continued to rationalise the UK store base and have been successful in transferring sales to nearby stores as part of this activity. Based on our experience in the first half, we are adapting our ranges and promotional activity to continue to offer the best prices to our customers whilst simultaneously working with our suppliers to reduce the level of margin investment. Following the appointment of a new senior management team in July 2011, we have further developed and expanded our beds business, which now represents approximately 6.0% of revenue. The new team will launch a significantly improved beds range in the third quarter of our current financial year and accelerated growth from the beds business will be an important area in the delivery of our sales and margin targets for the second half. The roll-out of our new laminate offering is progressing and we continue to develop our website to help drive store footfall. These factors are expected to combine to limit the impact on gross margin to around 300 basis points for the full year.
"The actions we have taken in our Rest of Europe operations are delivering an improvement in profitability despite a decline in sales.
"As a consequence of all of these factors, we expect underlying pre-tax profits for the full year to be towards the lower end of the current range of expectations.
"Looking forward, I see no respite from the challenging environment over the next year but remain confident the Group will emerge in a strong position to deliver future growth once consumer demand improves."
The Group will report its interim results for the first half of its financial year on 13 December 2011.
Analyst conference call
Lord Harris will host a conference call for analysts at 8.30am BST today.
The dial in number is 020 8817 9301 with the passcode 5849357
Thereafter, for further enquiries please contact:
Carpetright plc
Lord Harris of Peckham, Chairman and Chief Executive
Neil Page, Group Finance Director
Tel: 01708 802000
Citigate Dewe Rogerson
Kevin Smith / Lindsay Noton
Tel: 020 7638 9571
A copy of this trading statement will be available on our website www.carpetright.plc.uk today from 7.00am.
Notes
1. All sales figures are quoted after deducting VAT.
2. Like-for-like sales calculated as this year's net sales divided by last year's net sales for all stores that are at least 12 months old at the beginning of our financial year. Stores closed during the year are excluded from both years. No account is taken of changes to store size or introduction of third party concessions. Sales from insurance and house building contracts are supplied through the stores and included in their figures.
3. There have been no significant changes to the Groups financial position during the period.
4. Certain statements in this report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.
5. The current range of analysts' estimates for adjusted pre-tax profits for the 52 week period ending 28 April 2012 is £11.8m to £16.9m.
Appendix 1: Store portfolio
Store portfolio | 22 Oct 2011
| 23 July 2011 | 30 April 2011 | |||
Sites | Sq Ft '000 | Sites | Sq Ft '000 | Sites | Sq Ft '000 | |
UK | ||||||
Standalone | 480 | 4,275 | 489 | 4,342 | 497 | 4,416 |
Concessions | 23 | 46 | 25 | 49 | 42 | 98 |
Total | 503 | 4,321 | 514 | 4,391 | 539 | 4,514 |
Rest of Europe | ||||||
Republic of Ireland | 20 | 147 | 20 | 147 | 20 | 145 |
The Netherlands | 92 | 1,078 | 92 | 1,078 | 92 | 1,078 |
Belgium | 28 | 329 | 28 | 329 | 28 | 335 |
Total | 140 | 1,554 | 140 | 1,554 | 140 | 1,558 |
Total Group | 643 | 5,875 | 654 | 5,945 | 679 | 6,072 |