Carpetright has issued its second profit warning since Christmas and raised the prospect of potential store closures and job cuts amid the crisis facing many UK retailers.
The specialist carpet and floor coverings retailer admitted it now expected to report a “small” loss for the year to 28 April because UK like for like sales, while improving, remained negative and below expectations.
Shares – down over 60% over the past 12 months – fell 23% in early trading following the downbeat update.
Its statement said: “Trading conditions in the weeks since the group last updated the market on 19 January 2018 have remained difficult, characterised by continued weak consumer confidence.”
It added: “The group is therefore proactively engaged in constructive discussions with its bank lenders in order to ensure it continues to comply with the terms of its prevailing bank facilities. The bank lenders have indicated that they currently remain fully supportive.
“In addition to the discussion with its lenders, the group is examining a range of options to accelerate the turnaround of the business and strengthen its balance sheet.
“This process remains at an early stage and the Group will update the market on these initiatives as required.”
While it did not specify the measures it was considering, the company is understood to have a string of under-performing stores among its portfolio of 409 outlets in the UK.
It also has over 550 worldwide.
They are also all believed to be rented premises – with onerous leases blamed by many high street chains for contributing to high costs at a time when strong online competition and weak consumer confidence has hit sales.
Less than 24 hours before Carpetright’s latest profit warning, retail experts spoke of a ‘Black Wednesday’ for the sector as two major names collapsed into administration leaving 5,500 jobs hanging in the balance.
Sky’s City Editor Mark Kleinman also broke news that the Prezzo chain was planning to cut a third of its 300 restaurants.
Commenting on Carpetright’s statement Neil Wilson, senior market analyst at ETX Capital, said: “It’s been quite a climb-down from just a few months ago.
“In December it issued a profits warning, guiding underlying profit before tax for the year to be at the lower end of the previous range of £13.8m to £16.7m.
“As we noted at the time, profits warnings have a nasty habit of not coming alone and that guidance appeared to be wishful thinking.
“In January management slashed this to a range of £2m-£6m. Horrendous post-Christmas sales were to blame then but the trend is not improving.
“Now a small loss is expected as trading remains very difficult. That loss may not remain small if Easter doesn’t go well.”