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Carpetright stumbles in Europe

The flooring chain's mis-step in Europe has prevented it from meeting the market's first-half expectations
December 12, 2017

Carpetright (CPR) shares fell 5 per cent by time of writing on the day it reported half-year losses at its European business. A severe contraction in gross margins there from 57.5 per cent to 50.2 per cent was largely to blame for the £0.4m underlying operating loss, reflecting the inclusion of low-margin service income and widespread discounting. That offset progress at the UK business – which reported a 0.7 per cent improvement in underlying sales – and left the group trailing overall profit targets.

IC TIP: Hold at 173p

The rest of the year doesn’t look too rosy, either, with management taking a more cautious approach to the second half given weaker consumer confidence across the Netherlands and Belgium (hence the discounting), but also at home.

Chief executive Wilf Walsh said there was “no telling” what customers would do post-Boxing Day. Underlying pre-tax profits for the full year are now expected to be towards the bottom end of the current range of market expectations, and analysts at Peel Hunt have tweaked their forecasts accordingly. Analysts there now expect pre-tax profits of £13.1m (previously £15.4m) for the year ending April 2018, giving EPS of 14.4p (previously 16.9p), compared with £14.4m and 16p in FY2017.

CARPETRIGHT (CPR)   
ORD PRICE:173pMARKET VALUE:£117m
TOUCH:170-174p12-MONTH HIGH:255pLOW: 149p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:123p*NET DEBT:27%
Half-year to 28 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162224.15.8nil
20172280.3-0.4nil
% change+3-93--
Ex-div:na   
Payment:na   
*Includes intangible assets of £61.3m, or 90p a share