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Loss-making Carpetright takes action to rebalance stores and online

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Carpets-to-beds retailer Carpetright  is to reduce the size of its store network in the light of its experience that more customers are researching their purchases on the internet and making fewer visits to stores.

The company, which announced a 3.9% fall in sales and pre-tax losses of £0.8m in its half-year results today, said the “increasing trend” for customers to check out its products using the internet before coming into a store meant that customers were making fewer visits to stores. An average of more than 85,000 unique visitors came to the Carpetright website each week in the first half of the year, it said, 63% up on the same time last year. That has resulted in a corresponding increase in requests for both samples and appointment leads.

“Our experience is that growing numbers of customers appear to be prepared to travel further to make their single physical store visit to complete the purchase and we believe that, over time, this will result in a shift in the required geographic density of our store estate,” it said in its statement to the City today.

Leases on some 93 stores were due to expire in the next five years, it said, giving it an “opportunity to reshape the portfolio in a cost-effective way”. At the end of October, it said, there were 503 stores trading in the UK, and during the last six months it had opened four stores and closed 40, reducing store sizes where opportunities are available.

The update came as Carpetright today announced a 3.9% decline in total group revenue to £238.4m in the six months to October 29, and a pre-tax loss of £0.8m, significantly down from a profit of £9.8m at the same time last year.

In the UK like-for-like sales were down by 2.4% and total sales down by 4.6% to £192.1m. Gross margins were reduced to 58% from 62.3% last year, while total costs were down by £4.8m, or 4.2%.

Lord Harris of Peckham, chairman and chief executive, said: "Like many other retailers we are continuing to experience a very challenging trading environment, with significant sales volatility and a corresponding decrease in the gross margin. Against this backdrop, the Group has remained profitable on an underlying basis and continues to generate net cash.

"With the consumer environment expected to remain difficult, we are focusing on those opportunities that are under our direct control.”

Those include reducing costs, offering the best prices and improving its products while also focusing on the beds side of its business, which features in 238 of its standalone stores and is now being developed under a new management team.

Our view: Carpetright is not the first business to reduce its high street presence in the light of its online trade – Arcadia last month announced a similar move http://www.internetretailing.net/2011/11/topshop-owner-the-arcadia-group-to-rebalance-stores-and-internet/, and companies such as Mothercare have been heading in a similar direction for some time, reducing the space of its stores and focusing on out-of-town locations. In the future it seems companies will simply need less space for their shops. The focus now should be on finding good ways to use the space that is surplus to requirements.
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