NEWS EXTRA


DESPITE LOSSES, CARPETRIGHT REMAINS CONFIDENT IN RESTRUCTURE


at the start of the new financial year was impacted by the ongoing Company Voluntary


F Agreement


(CVA) and withdrawal of some suppliers, leading to stock shortages. In his review of the results, Carpetright chief executive Wilf Walsh said that “significantly increased competition and signs of a slowdown in consumer spending” has left the business exposed, adding that Carpetright’s “historically oversized and over-rented estate” further compounded the situation However, he remains confident in the restructuring plan currently underway following the announcement of a CVA in March. “The CVA and recapitalisation offers us the significant chance to rebuild as a profitable market leader with outstanding brand awareness and we do not intend to miss this opportunity,” he said. Group revenue dropped 3% to £443.8million for the year, with an underlying pre-tax loss of £8.7million, in-line with previous guidance, Net


said debt the saw a huge and the


company. increase


from £9.8million to £53million, highlighting a decline in operating performance


tightening


of credit terms by what the firm described as “suppliers responding to adverse publicity surrounding the group’s restructuring”. Meanwhile, separately-reported items of £61.8m, driven mainly by the costs and accounting impact of the restructuring activity, lead to a


looring retailer, Carpetright posted pre-tax losses of £70.5million for the year ended April 28 and says trading


of activity to get it fit for purpose and to create a modern shopping environment for our customers.” Under plans set out by the company, all remaining UK stores are to receive some form of additional investment by the end of the CVA period in 2021, with priority being given to most profitable sites, which tend to average around £22,500 per week in sales.


Creating opportunities Meanwhile, like-for-like sales of hard flooring increased by 9.2% in the UK, reflecting a greater strategic focus on this category. Carpetright said it has seen the category grow in popularity and believes the area represents a big opportunity to grow its overall market share in floorcoverings. As part of this strategy, it is


statutory loss before tax of £70.5m against a £0.9million profit in 2017. In tough trading conditions, like-


for-like sales in the full year declined by 3.6% with a decrease of 7.8% in second half of the year; offsetting the increase of 0.7% reported for H1. As expected, trading in the first eight weeks of


the new financial


year was heavily impacted by the disruption arising from the group’s restructuring activity, including stock shortages, as some suppliers had withdrawn supply. The exceptionally warm weather also had a negative effect, said the company. Chief executive Wilf Walsh offered his thoughts on the figures. “The three headwinds of our legacy property estate, increased competition and a downturn in consumer spending all combined to make 2017/18 a year to put behind us,” he said. “We will not be diverted from our plan to transform the Carpetright


business. The four main planks of our strategy remain relevant and, finally, we have comprehensively tackled our significant and ultimately, debilitating property issues.” He added: “Completing the


turnaround will take time and the road ahead remains a challenging one – but we now have the resources to fully fund our revised business plan. Implementation of the CVA is well underway and the 92 closures will be complete by end September.” The 92 sites that are closing as a


result of the CVA average £11,500 sales per week, with a rent-to-sales ratio of 28.9% and make no profit contribution, Carpetright explained.


Investing in its estate A revamp of the existing Carpetright portfolio continues, with 227 UK stores – amounting to 55% of the UK estate – already trading under the new brand identity by May 2018. Refurbished stores continue to outperform the uninvested estate, delivering like-for-like sales growth of 9.2% above those stores that have seen no investment.


The work carried out in stores has ranged from introducing new signage and a sample area for carpet in those stores that make a smaller profit, through to the full refurbishment of larger, highly-profitable stores, or in areas where Carpetright is tackling new competition.


“Investment in our store estate has been crucial,” said Mr Walsh. “Our properties had been chronically underinvested for years and we have been implementing a programme


12 DIY WEEK 29 JUNE 2018


introducing an increased number of products across all categories, from vinyl, through to engineered wood, it is developing its own-brand ‘Tegola’, and creating new extended hard flooring zones following a successful in-store trial. Its online ofer will also be greatly extended and staff training has been ramped up in the category, so that colleagues get to an “expert” level, said Carpetright. Looking ahead, Carpetright believes online is key to the business. “The sad demise this year of a number of traditional retailers is partially down to the fact that they were not ‘Amazon proof’,” said Mr Walsh. “Most of the products they sell could be chosen online and delivered to the home the next day. While choosing floor coverings is not such an easy sell online we are not being complacent.” Carpetright’s digital strategy involves increased marketing spend on search engine optimisation, pay per click and video on demand in order to improve consideration of Carpetright when customers research online, as well as improving the instore experience by using digital technology and the benefits of its new online platform. Mr Walsh also said that he acknowledged “that some customers will not want to visit a retail store ever “and is working on a strategy to ensure Carpetright has the online capability to help them measure their home accurately, choose products and accessories and complete the end-to-end experience “without needing to visit a retail outlet or talk to a human being”.


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