Join our community of smart investors

Carpetright's store refurb paying off

Like-for-like sales are much higher in new-format stores, but competition remains tough
June 27, 2017

Headline profits collapsed at Carpetright (CPR) in the year to April 2017, but as the decline was pretty well flagged, the shares rose over 8 per cent on some improved underlying revenues.

IC TIP: Hold at 194.5p

Like-for-like sales grew by 1.8 per cent in the second half, although this was not enough to offset a first-half decline, and overall comparable sales were down 0.5 per cent. However, the refurbishment programme looks to be working well, with the stores operating under a new brand identity delivering a 6.8 per cent rise in like-for-like sales. Refurbishment of the remaining half-of-the UK stores is expected to be completed by the end of 2018. And despite the widespread dip in consumer sales in May, Carpetright's domestic sales were up 2 per cent in the seven weeks to 17 June 2017, on the same comparable basis.

Underlying operating profits were down from £17.8m to £10.7m. Increased competition makes it harder for the company to pass on the higher import costs caused by sterling weakness. To firm up margins, underperforming stores have been picked out and nine closures were made during the year, taking the number of outlets down to 426. However, exiting leases and weaker profits pushed net debt up from £1.1m to £9.8m.

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to April 2018 of £16.7m and EPS of 18.4p (from £14.4m and 16p in FY2017).

CARPETRIGHT (CPR)
ORD PRICE:194.5pMARKET VALUE:£132m
TOUCH:190-198.75p12-MONTH HIGH:293pLOW: 149p
DIVIDEND YIELD:NILPE RATIO:195
NET ASSET VALUE:115p*NET DEBT:13%

Year to 29 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013458-5.1-9.8nil
2014448-7.2-5.3nil
2015**4706.66.7nil
201645712.814.9nil
20174580.91.0nil
% change+0-93-93-

Ex-div: na

Payment: na

*Including intangible assets of £57m, or 84p a share **53-week period