Carpetright profits flying as new strategy kicks in

Full year pre-tax profits flew higher at Carpetright as the retailer grew like-for-like sales and returned to growth in Europe thanks in part to December's new strategic plan and a handful of store closures.

The company's group revenue rose 3.3% to £462.6m, underlying profit before tax (PBT) rose 186% to £13m, lifting underlying earnings per share nearly threefold to 13.7p.

In the UK, a 7.3% increase in like-for-like sales led to a 33.6% rise in underlying operating profits to £14.3m as the store base was trimmed by a net twelve during the year to 460 outlets.

In Europe, a net five shop closures to a end-of-year total of 137 and like-for-like sales improving 0.3% combined to help underlying operating profits break even at £0.3m after the previous year's £4.4m loss.

However, profitability was hit by an exceptional charge of £7.6m, driven by onerous lease provisions, which cut group PBT to £6.6m and basic EPS for the year to 6.7p. But the company enjoyed a positive cash position at the period end, with net cash on the balance sheet of £0.5m.

In a new year that will see the relaunch of the Carpetright brand, with a new logo and trials of a new store 'concept store' format, trading has begun well with like-for-like sales ahead by 4.9% in the UK and 7.4% in the Rest of Europe, on a local currency basis.

Chief executive Wilf Walsh said the range of strategic initiatives put in place in December will "broaden the appeal of the Carpetright brand and reposition the business, to ensure it is better able to capitalise on its market leadership position. We have made a promising start with these plans, establishing a real momentum for change within the business."

The trial of new retail concepts has been put in place in four stores in and around London, beginning in July 2015.

The company said each store will trial an experimental shop fit that is a "significant departure" from existing stores, "with new elements to inspire customers and encourage experimentation, sampling and discovery" and an emphasis is on a "smooth, dedicated service to customers that takes the pressure out of selection and purchase".

Other changes include a review of store discounting policy, the introduction of interest free credit for the first time in the company's history, a new design team to freshen up the product range, strengthening the hard flooring selection in the UK using experience from Europe, and a £4.5m store systems upgrade.

The downsizing of the store portfolio will continue with the aim of reducing total square footage but not necessarily store numbers, improving the quality of the estate by relocating to better sites; and to reduce property costs via rent reductions.