The gloom on the high street deepened on Wednesday as struggling Carpetright said it would close more stores, Moss Bros issued a stark profits warning, B&Q reported falling sales and profits, and Mothercare said it remained in talks with its bankers.
Carpetright, Britain’s biggest carpets retailer, did not reveal how many outlets might shut, but it is believed to be considering axing up to a quarter of its 409 UK stores. A decision is expected in the next few weeks. It said the closures were needed to address the “legacy property issue” resulting from overexpansion under its previous management.
The company is considering a company voluntary arrangement (CVA), a process designed to stave of insolvency by closing stores and renegotiating rents with landlords. It has arranged an emergency short-term loan of £12.5m from shareholder Meditor in return for an additional 5% stake and also wants to raise between £40m and £60m through an equity issue.
Carpetright has issued a series of profits warnings in recent months, sending its shares sharply lower. At their current level of 41p, the business is valued at less than £30m.
The potential Carpetright closures come as fashion retailer New Look’s creditors meet on Wednesday afternoon to vote on a CVA that will involve the closure of up to 60 of its 593 stores and rent reductions on dozens more.
There was grim news from men’s tailoring retailer Moss Bros as it warned that profits for the coming year were likely to be “materially lower than current market expectations”. The company’s shares crashed more than 20% to 46p as it said the suit hire business was “challenging” and that the number of shoppers on the high street remained lower than hoped, “reflecting a more cautious consumer environment”.
At B&Q, which is owned by Kingfisher, sales dropped by 5.1%as the chief executive, Véronique Laury, described the outlook for the UK as “uncertain”. Kingfisher’s profits for the year to end January were down by 10% to £682m.
The slowdown at Kingfisher comes despite troubles at its major competitor Homebase, where sales have slumped since a botched takeover by Australian group Bunnings. The group is considering closing as many as 40 stores putting hundreds of jobs at risk.
Meanwhile, Mothercare, the struggling mother and baby retailer that is in talks with its banks, has been given more time to secure extra funding. Its lenders have deferred the testing of its financial covenants – which had been due on Saturday – until May. The retailer said talks on the terms of its existing loans were “progressing constructively” and it hopes to reach agreement by mid-May when its results are due.
“Retail Black Wednesday: the sequel,” said Patrick O’Brien, the UK retail research director at market research firm GlobalData. “Just three weeks after the administrations of Toys R Us and Maplin were announced on the same day dubbed ‘Black Wednesday’, it appears the sequel is already upon us, with Moss Bros, Carpetright, Mothercare and New Look all being in the news for the wrong reasons.”
Slowing consumer spending, rising costs and the switch to buying online have bitten down hard on retailers in the past six months, with businesses including electronics store Maplin, children’s specialist Toys R Us, furniture retailer MultiYork and bedmaker Warren Evans calling in administrators and putting thousands of staff out of work.
Department stores House of Fraser, Debenhams and Marks & Spencer are also closing store space as they try to adapt to changing shopping habits.
The recent snowy, cold weather also hit trade for many retailers, with sales at John Lewis down 14% that week, while Ocado warned on Tuesday that it took a £1.5m profit from the “Beast from the East”.
Expensive homewares such as sofas, kitchens and carpets have taken a particular hit as the housing market has slowed.