Carpetright turns it around, share rise 10%
Carpetright looks to be on track. CEO Wilf Walsh has got things sorted out it seems.
April’s trading update flagged a good year end with management reporting that the UK like-for-like sales trend improved significantly in the fourth quarter as customer confidence in the business started to return.
Today’s FY results show it has been a year of two halves –
CVA and restructuring efforts in the first half left UK LFL revenues down
12.7%. But the second half was much stronger – the decline reduced to 5.4%, and
2.3% in Q4. Full year revenues declined of 17% and LFL declined 9.1%. The
UK underlying EBITDA loss of £400,000 was in line. Rest of Europe reported
revenue growth of 1.9% and like-for-like growth of 3.4%, again with a much
Group revenue decreased by 13.4% to £386.4m. Underlying
EBITDA of £2.9m is in line with expectations. Pre-tax loss fell to £24.8m
from the £69.8m last year.
This all sounds rough but it has genuinely has been a transformative year for the group. Carpetright has closed a thumping 80 stores and reduced rents to zero on 23 further outlets. They’ve thrown the kitchen sink at the problem and it’s working.
Crucially the new year has started very well – UK
like-for-like sales in the first eight weeks ahead by 8.5% against the prior
year comparative. LFL sales in Rest of Europe were ahead by 4.3%.
This is not a surprise – we noted in December the
encouraging signs from Carpetright’s interim results that indicated that its
restructuring is on track. And the second half has only been better.
The problem for Carpetright was simply that it
had expanded too quickly with too many stores on bad sites
with overly-long leases and upwards-only rent reviews. That’s fine in the good
times but when the market softens you are left exposed. Action to tackle this
singular problem has been swift and is paying off.
And as we noted in December, Carpetright has moved on from
the reputational concerns in relation to negative headlines earlier
in 2018. The upbeat start to the new financial year confirms this.”