Carpetright, Europe’s leading specialist in carpet and floor coverings has announced a trading update covering the 13 weeks to the end of January highlighting a continued divergent trend between UK and European trading levels. In the UK, LfL sales increased by 1.9% on a LfL basis (est. 2.8%) while in the Rest of Europe segment, sales decreased by 7.7% on a LfL basis (est. -6.5%). <p>

As a result the company missed forecasts in both the UK, the group’s largest single geography and across Europe which is made up out of the Netherlands, Belgium and the Republic of Ireland. Management characterise the UK market as continuing to be “volatile” but the company is benefitting from self help measures that have been deployed in recent years. However, profit for the UK is in line with management’s forecasts. Across Europe, however, the outcome is different with business levels continuing to fall in the Netherlands, where management are guiding to be loss making in the country. <p>

As a result of the weak trading conditions in the Netherlands, Carpetright are now guiding for underlying pre-tax profits to be at the lower range of current market forecasts. <p>

Overall, while we anticipated that the Netherlands would continue to trade poorly for Carpetright, the renewed declines in sales in the country will be of concern given that management appear to be preparing the market for further difficulties rather than attempting to provide guidance that the worst is over for the Dutch market. It is also worth noting that the short interest in Carpetright has seen a significant shift higher in recent weeks (+47%) with 8.3% of the shares outstanding now short.
<p><h5>David Holohan</h5>


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