Like a lot of other retailers suffering a similar plight, the Carpetright share price has been in free fall for some time now, joining the ranks of household names like Mothercare, House of Fraser, Maplins and Toys R Us, in succumbing to the buckling weight of higher costs and lower revenues.
Just over a year ago Carpetright posted a £71m loss in its full-year numbers, prompting the business to embark on a significant turnaround plan and enter a company voluntary arrangement with its landlords.
In a sign of how difficult it was to turn the business around, Carpetright announced a further loss of £11.7m in the first half of the year, as well as the closure of 65 stores, with another 11 to close in the second half. In total, 80 stores have now been closed in the UK, along with three in Europe, bringing the total number of stores down to 466, from 545 in 2018. Four new stores were opened over the same period.
This morning's jump in Carpetright's share price
Today’s full-year numbers, while still a little disappointing, do appear to show that the company is heading in the right direction, however the business isn’t being helped by the difficult retail environment.
Overall revenues came in at £386.4m, almost in line with expectations, but still well down from the £446.3m a year ago – not surprising given the mass of store closures. Losses also narrowed to £24.8m from a year ago, however this was higher than expected. More encouragingly, net debt has been reduced from £53m to £27.4m.
A stronger second half
The second half of the year saw a significant improvement, with the company saying that its refurbishment program, which involves upgrading its remaining stores, was helping the company to return better numbers than expected. As a result company performance has been much more positive in terms of revenues than it was in the first half. This optimism does appear to be being reflected in early dealings today, with a big jump in the share price, however we saw a similar rebound earlier this year, before prices subsequently slipped back.
CEO Wilf Walsh also went on to say that in the first eight weeks of the new financial year, this momentum had been sustained with UK like-for-like sales growing by 8.5% from a year ago. He said the turnaround plan was very much on track, with the “Carpetright For Life” campaign being instrumental in rebuilding the brand's reputation.
He went on to say that the issue of the business rates burden on the retail sector in general needed significant reform from government, and was the main reason behind the decision to restructure a year ago. However, he added that the business still remained on track to deliver £19m of annual cost savings.
Time will tell whether Carpetright can reinvigorate its reputation, however the omens are positive. It is clear that over 12 months on from the company’s CVA, the business is looking a lot less threadbare, and is in a much better position to survive what continues to be a very tough retail environment.