Carpetright Shares Crash on Latest Profit Warning

Europe's largest floor covering firm is the latest retailer to see a profit warning punished by a severe share price reaction

James Gard 19 January, 2018 | 9:41AM
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Carpetright

Carpetright (CPR) is the latest British retailer to suffer a share price plunge after a profit warning. The company’s shares crashed 45% to 90p on Friday morning after it said that trading had declined sharply in the post-Christmas period and revised full-year profit downwards.

The largest floor covering firm in Europe said on Friday said like-for-like sales declined 3.6% in the 11 weeks to January 13, while total sales were down 2.3%. The firm said there has been a sales decline of 7.1% since Christmas in core flooring.

Analysts had expected full-year profits to be £14 million, but Carpetright said today that profits would be between £2 million and £6 million. This follows a profit warning in December. "Despite a positive start to our third quarter, we have seen a significant deterioration in UK trading during the important post-Christmas trading period.

"While average transaction values were up year on year, the number of customer transactions since Christmas was sharply down, which we believe is indicative of reduced consumer confidence," said chief executive Wilf Walsh.

Profit warnings from Debenhams (DEB) and Mothercare (MTC) also saw their shares sold off by more than 20%.

In the last financial year, pre-tax profit dropped from nearly £13 million to £900,000 after one-off leasing costs. After the results Jordan Hiscott, chief trader at ayondo markets said: “Carpetright’s result shows a staggering 93% fall in pre-tax profits year-on-year. It seems one-off large expenditure items, such as carpets, have felt the fall effect of both Brexit and the snap UK Election, with consumers delaying such purchases in the face of a generally uncertain future.

"Going forward, if we look at Carpetright’s share price - currently 190p, this is still a sizeable 43p from the 20-year low of 147p, but hugely down from the all-time high, made in 2007, at a level of 1365p.”

Fund Exposure to Carpetright

The largest shareholders are listed as Franklin Templeton with nearly 18%, Saudi investors Olayan Group with 13%, Fidelity International Limited with 9% and asset managers Meditor Capital Management with just over 7%.

In terms of fund owners, Aberforth Smaller Companies Trust (ASL) owns more than 7% of the company. The fund has a Morningstar Analyst Rating of Silver.

JOHCM UK Growth Fund, which has a Morningstar Analyst Rating of Silver, owns nearly 5% of Carpetright, and the stock makes up nearly 1.7% of the fund’s portfolio.

Investment trust Fidelity Special Values (FSV) holds nearly 2% of Carpetright. The trust, run by manager Alex Wright, has a Bronze Rating.

 

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aberforth Smaller Companies Ord1,466.00 GBX-0.27Rating
Fidelity Special Values Ord297.00 GBX-0.83Rating
JOHCM UK Growth GBP A Inc4.39 GBP-1.14Rating
Mothercare PLC4.70 GBX1.08

About Author

James Gard

James Gard  is senior editor for Morningstar.co.uk

 

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