Trading at Carpetright received a boost but was still down year-on-year in the last quarter, according to an interim management statement released today by the carpets and flooring specialist.
Overall group sales fell 1.5 per cent in the 12 weeks to July 23rd 2011 compared to the same period last year whilst revenues in the UK saw a sharper decline of 2.3 per cent, with like-for-likes (LFL) dropping 0.2 per cent.
In contrast to the year ending April 30th, where trading shrunk by 5.8 per cent in total and six per cent LFL in the UK, this represents good progress for the retailer which has been hit hard by a significant dampening in consumer spending on home fittings.
Despite signs of recovery in trading, margins seem to have been dramatically reduced by discounts and a change of product mix, and the group has also closed a net 25 stores during the first quarter.
Lord Harris of Peckham, Chairman and CEO of Carpetright, said: “We have seen an encouraging movement in UK LFL sales from the exit rate of the previous financial year, driven in part by our investment to support strong promotional activity, the growth of our bed sales and the roll out of our new laminate offer.
“This investment, combined with an increasing proportion of beds in the sales mix, has diluted the gross margin and we currently expect the full year figure to be around 200 basis points lower than the prior year.
“We continue to implement cost management initiatives and expect our full year UK costs to be below last year.”
Due to Focus DIY entering administration, Carpetright closed 16 concessions previously housed in the failed retailer’s stores, whilst another concession and eight standalone outlets in the UK were also shut down over the three months
No stores were closed in Carpetright’s international operations but sales still struggled in these regions, down 6.2 per cent in sterling and 4.2 per cent lower year-on-year LFL in local currencies.
Investment Bank Espirito Santo warned today that the change in gross margin could take nearly 50 per cent off profit before tax estimates for this year but analyst Sanjay Vidyarthi admitted that its restructuring means “Carpetright will emerge stronger in any consumer upturn”.
Harris added: “Looking forward, I see no respite from the challenging environment over the next year but remain confident the group will emerge in a strong position to deliver future growth once consumer demand improves.”