Carpetright cuts prices in move to stem fall in British and Irish sales
“I see no respite from the challenging environment over the next year,” chairman and chief executive Philip Harris said highlighting an overall British carpet market down 15-20% year-on-year.
The firm, which has issued three profit warnings this year, said sales at British stores open over a year fell 0.2% in the 12 weeks to July 23, the bulk of its fiscal first quarter.
That represented a significant improvement on a decline of 6.3% in the fourth quarter of the previous year.
Harris, who has been selling carpets for 53 years, said the better sales performance reflected price cuts, growth in bed sales and a new laminate offer but would result in a 2 percentage point fall in the 2011-12 gross margin compared to the prior year. The firm had previously guided to a margin fall of about 50 basis points.
“We did a lot of research around underlay, gripper and door bars and we found that we were too expensive, that’s the area we’ve reduced,” he said.
On an average order of £400 (€459), consumers were now saving £50-£60, said Mr Harris.
“We’ve only being doing that for four weeks and we’ve seen sales go up very much. If they continue at that rate we’ll be happy to give up the 2 (percentage) points on the gross margin,” he said. Mr Harris, whose family own a quarter of Carpetright’s equity, said the margin fall would be offset by British costs being £6 million to £8m below the 2010-11 year due to rent, rates and staff savings from store closures and downsizing.
He has high hopes for Carpetright’s beds business, which represents about 6.3% of total sales. “We’ve taken two of the best people out of the bed trade who started with us yesterday and they’re absolutely convinced they can double our turnover in beds,” he said.
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