Carpetright has warned its full-year loss will be double those previously expected, as the struggling retailer received backing from creditors and shareholders for a restructuring process designed to stave off administration.
Britain’s biggest carpet retailer now expects to make an underlying pretax loss of £7m to £9m for the year to the end of April, up from £4m forecast a month ago. At the start of this year the City had pencilled in profits of £13m. It is the fourth profit warning in five months.
Like-for-like sales slumped 10.5% in the past three months. Over the full year, like-for-like sales fell by 3.6%.
Carpetright, Poundworld and Fenwick set to axe jobs
Like other retailers, especially those selling home furnishings, Carpetright has been hit by weak consumer confidence and the slowdown in the housing market, with fewer consumers buying carpets and furniture. It said publicity around its restructuring had also negatively affected sales.
Carpetright is shutting 92 stores, with the potential loss of 300 jobs, and has asked landlords for rent reductions of up to 50% on 113 more sites under a company voluntary arrangement (CVA).
The CVA was approved by more than 75% of the unsecured creditors and also received backing from shareholders on Monday. Carpetright stressed that the company continued to trade under the control of the directors, operating as a going concern, and would not go into administration as a result of the CVA.
The retailer said it hoped to secure interim funding of up to £15m from its banks and expected to launch an equity fundraising on 18 May.
Wilf Walsh, the Carpetright chief executive, said: “The CVA proposal will enable us to take the tough but necessary actions needed to restore our profitability. Having now received approval from both shareholders and creditors we will press ahead with our plans for the proposed equity financing to recapitalise the business and enable Carpetright to address the competitive threat from a position of strength.”
Under Walsh, about half of Carpetright’s stores have been modernised and are performing better than the rest.