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Carpetright reports £70m loss as it counts the cost of store closures and adapts to the demands of the multichannel shopper

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Carpetright is investing online to counter the 'Amazon effect'
Carpetright is investing online to counter the 'Amazon effect'
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Carpetright reports £70m loss as it counts the cost of store closures and adapts to the demands of the multichannel shopper

Carpetright has reported bottom-line pre-tax losses of £70.5m as it takes stock of the cost of adapting its store estate to an era when online, in the words of its chief executive Wilf Walsh, is "key to this business in the short and medium-term".

 

The carpets-to-beds business, a Top350 retailer in IRUK Top500 research, says it must now adapt to the behaviour of customers from those who never want to visit a store to those who want to buy using a range of channels.

 

The update came as Carpetright reported group revenue of £443.8m in the year to April 28, down by 3% on the previous year. Like-for-like sales fell by 3.6% over the year, with a first half increase of 0.7% offset by a decrease of 7.8% in the second half.

 

Top line pre-tax losses came in at £8.7m, from a profit of £14.4m last time. But after one-off costs of £61.8m, largely related to restructuring "to address legacy property issues in the UK" bottom-line pre-tax losses fell to £70.5m from a profit of £0.9m last time. Through a company voluntary arrangement, 81 underperforming stores that, Carpetright said today, make an average of £11,500 a week and do not contribute to profits, are closing by the end of September 2018. But by the end of April 2018, 227 UK stores were trading under a new brand identity. That represents 55% of a UK store estate that stood at 545 at at the end of the year that saw a net 19 stores close.

 

Trading in the first eight weeks of the new financial year was hit by disruption coming from restructuring activity, said Carpetright, with stock shortages as some suppliers withdrew their supplies, and as a result of warm weather.

 

"It has been a very difficult year for our business," said Walsh. "After a disappointing first half, our Boxing Day sale started and never really got going. With significantly increased competition and signs of a slowdown in consumer spending this left us exposed, particularly given our historically oversized and over-rented estate."

 

He said that the retailer was "ultimately unable to carry the weight of a long tail of underperforming stores on uneconomic legacy tests" and that profit warnings, slow trading and the prospect of making a financial loss put it in the position of needing to consider "a much more radical restructuring" through its "only option", a company voluntary agreement (CVA) and business refinancing.

 

He said that so far 31% of the staff affected by the move had been redeployed within the business and that it hoped to find jobs for more of those people.

 

Now the retailer plans to grow its range, including an extended online offer. It is also focusing on a value bed range, but will only stock beds where there is space.

 

Walsh said: "The sad demise this year of a number of traditional retailers is partially down to the fact they were not ’Amazon proof’ and most of the products they sell could be chosen online and delivered to the home the next day. While choosing floor coverings is not such an easy sell we are not being complacent."

 

He said that Carpetright would now improve its online offer through enabling those customers that will never visit a store to measure up for and choose a carpet and accessories entirely online "with confidence and complete the end to end experience without needing to visit a retail outlet or talk to a human being."

 

Carpetright is also focusing on making its online presence inspirational and easy to navigate, with increased spending on search, via both SEO and PPC as well as video on demand. "In terms of marketing budgets these formats are rapidly taking over from the decline in traditional press consumption and this trend is across all demographic groups," said Walsh, in his statement.

 

In-store the retailer is using digital technology to consolidate the benefits of its new Microsoft Dynamics 365 online platform. "Using artificial intelligence we will deliver customer service automation with personalised content and recommendations currently being utilised to great effect elsewhere in the retail sector."

 

Carpetright’s European business reported revenue of £83.4m, 3.6% ahead of last time, with gross profits of £43.5m down by 0.7% on last time. Carpetright has 138 European stores in the Netherlands (94), Belgium (23) and the republic of Ireland (21).

 

Image courtesy of Carpetright

 

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