 have dropped by almost 25 percent as the company issued its second profit warning this year. ){kind=link}
Shares in Carpetright (LON: CPR) have dropped over 25 percent as the company issued its second profit warning this year.
The group is currently in talks with banks regarding lending terms and have said that banks “currently remain fully supportive” during this difficult.
“The group is proactively engaged in constructive discussions with its bank lenders in order to ensure it continues to comply with the terms of its prevailing bank facilities,” said Carpetright in a statement. “The bank lenders have indicated that they currently remain fully supportive.”
Although previous expectations for full-year profits were around £14 million, the group warned in January that full-year profits would more likely be between £2 million and £4 million.
Carpetright has 416 stores in the UK, where sales have been struggling. The group also has stores in Netherlands, Belgium and the Republic of Ireland, where trading has been more promising.
It is likely Carpetright will close some of the under-performing UK stores.
“The question is whether Carpetright is just on the wrong end of a cyclical slowdown, or whether there is a deeper structural problem facing this business: the answer is probably some of both,” said Neil Wilson, senior market analyst at ETX Capital.
Chief executive, Wilf Walsh, is attempting to modernise stores and bring the group round to a bigger profit. The retailer a is considering a “range of options to accelerate the turnaround of the business and strengthen its balance sheet”.
This will likely be in the form of refurbishments and closures.
“The issue here is a rent bill of £80m and a UK store portfolio of circa 400 stores that should really be under 300,” said Canaccord Genuity analyst, Sanjay Vidyarthi. “The average lease length as at April 2017 was 5.5 years. The cost of an early exit from onerous leases is likely to be hugely material relative to current market cap.”
Following the drop in shares, the group is now valued at £40 million. Shares stood at 58 pence at lunchtime on Thursday.
It is a troubling time for many retailers. Toys R Us and Maplin went into administration this week.