Shares in British flooring retailer Carpetright jumped up to 10% on the back of the company suggesting its restructuring plan, which will see more than 90 stores close and 300 jobs cut, is beginning to yield positive results.
Shares in the company have fallen by close to 90% this year, but rose yesterday on improved revenues and signs of effective cost-cutting measures.
Carpetright announced its costcutting plans in April. None of the company’s 20 stores in Ireland are affected, but the programme hit its operations in the North hard, with five stores earmarked for closure; roughly half of Carpetright’s shop estate in the North.
The company’s core markets are the UK and Ireland. It said revenues for the six months to the end of October; the first half of its financial year, fell by just under 16% to £191.1m (€211m). Underlying losses amounted to £1.7m, down from an underlying profit of £8.6m for the same period last year, and Carpetright generated a statutory pre-tax loss of £11.7m.
While revenue in the first half fell more than 15%, the second quarter showed signs of life. Domestic comparable sales declined 8.9%, an improvement on a 16.8% decline in the previous three months, the company said.
“We remain on schedule and are confident that this activity is already starting to yield benefits,” chief executive Wilf Walsh said.
“This is a transitional year for Carpetright as we work through our restructuring plan. This is the first stage in returning the group to sustainable long-term profitability,” he said.
“Carpetright’s interim results show good progress in what is effectively a transitional year following the company voluntary arrangement implementation and restructuring programme,” Peel Hunt analyst Jonathan Pritchard said.
The turnaround effort at Carpetright is complicated by uncertainty for British consumers stemming from the UK’s planned exit from the EU, according to analysts at Shore Capital.
Carpetright’s like-for-like UK sales fell by almost 13%, but again showed strong improvement in the second quarter.
Following management changes, like-for-like sales at its mainland European operations increased by 0.5%, which was a significant improvement from the decline experienced in the second half of the previous financial year.