Carpetright shares floored by profit guidance on weaker sales

Shares (Berlin: DI6.BE - news) in Carpetright (Other OTC: CGHXF - news) slumped 8% after it warned slowing sales growth had knocked its profit expectations.

The company said like-for-like sales at its UK stores grew by 1.4% in the 12 weeks to 22 April, its fourth quarter, compared to a rise of 1.9% over the previous three months.

Carpetright, which is the country's largest flooring retailer, said the deterioration meant annual profits would now come in at the lower end of market forecasts.

They averaged an underlying profit before tax of £15.2m - down from £17.3m achieved in the 2015/16 financial year.

Carpetright said it was facing a more difficult consumer environment - in common with many other retailers as sales slow because of the growing squeeze on household spending power.

Recent official figures have shown average wage rises slowing below the rate of inflation.

Retailers are under pressure to raise prices to help them account for higher import costs - a consequence of the collapse in the value of the pound since the UK's Brexit vote.

The Office for National Statistics said a plunge in retail sales last month was down to "price increases across a whole range of sectors."

Carpetright updated the market on its progress at the same time as Whitbread - the owner of Costa and Premier Inn - which also warned of a "tougher" consumer environment .

Wilf Walsh, Carpetright's chief executive, said: "In common with other retailers in the home improvement sector in the UK we have experienced tougher trading conditions over the last three months.

"Having said that, we are pleased to report continued like-for-like sales growth, with an increase of 1.4% in our fourth quarter.

"Following a further acceleration of the investment programme in the final quarter we have completed 188 store
refurbishments - surpassing our target of 150 stores, which represents over 40% of the UK estate.

"Despite the inevitable disruption factor, the performance of these refurbished stores has been encouraging giving us confidence to continue with the programme.

"Trading in the Rest of Europe was in line with our expectations, underpinned by a continuing recovery in economic
confidence, particularly in the Netherlands.

"Whilst we remain confident in our turnaround plan, the level of sales growth in our final quarter leads us to expect
that full year profits will be towards the lower end of the current range."

Its shares, 37% down on a year ago, were trading 8% lower in early deals on the FTSE 250. They later recovered some of that ground to be 5% down by mid-afternoon.