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United Carpets blames retail environment as it warns on profits
12th Feb 2020 15:49
(Sharecast News) - Specialist carpet and floor covering retailer United Carpets updated the market on its trading on Wednesday, ahead of its year-end on 31 March, reported that there was no appearance of any uplift in trading following the general election result in December.
The AIM-traded firm said that as a result, the retail environment had continued to be "challenging".
As it had announced in its interim results in December, trading in the key quarter leading up to the Christmas period was "comparatively poor", reflecting weakened consumer confidence and making the outcome for the full-year vulnerable to any further market weakness.
"While total sales for the Group are expected to be significantly ahead of the prior year, driven by the group's new instalment payment channel, like-for-like sales from the store network for the eight weeks since the announcement of the half-year results were down 5.7%," the board reported.
"The new instalment payment channel has, in the board's opinion, significant future potential, however, start-up and higher than anticipated servicing costs has meant it will not be profitable in the current year."
Current market conditions were "very competitive", United Carpets said, as all retailers competed for every sale leading to aggressive discounting, with the firm saying it had acted to provide increased support for its franchise network.
The combination of those factors meant that the board now expected profit before tax for the full year to be below current market expectations of ?0.5m, and in the range of ?0.15m to ?0.20m before non-cash costs associated with IFRS 16.
"Importantly, United Carpets remains a well-positioned business with a strong brand and well established, predominantly franchised, store network," the directors added.
"The company has significant cash balances and virtually no debt, creating a platform that together with its experienced management team means it is well placed to benefit from any upturn in market conditions."
At 1414 GMT, shares in United Carpets Group were down 8.57% at 4.8p.
The AIM-traded firm said that as a result, the retail environment had continued to be "challenging".
As it had announced in its interim results in December, trading in the key quarter leading up to the Christmas period was "comparatively poor", reflecting weakened consumer confidence and making the outcome for the full-year vulnerable to any further market weakness.
"While total sales for the Group are expected to be significantly ahead of the prior year, driven by the group's new instalment payment channel, like-for-like sales from the store network for the eight weeks since the announcement of the half-year results were down 5.7%," the board reported.
"The new instalment payment channel has, in the board's opinion, significant future potential, however, start-up and higher than anticipated servicing costs has meant it will not be profitable in the current year."
Current market conditions were "very competitive", United Carpets said, as all retailers competed for every sale leading to aggressive discounting, with the firm saying it had acted to provide increased support for its franchise network.
The combination of those factors meant that the board now expected profit before tax for the full year to be below current market expectations of ?0.5m, and in the range of ?0.15m to ?0.20m before non-cash costs associated with IFRS 16.
"Importantly, United Carpets remains a well-positioned business with a strong brand and well established, predominantly franchised, store network," the directors added.
"The company has significant cash balances and virtually no debt, creating a platform that together with its experienced management team means it is well placed to benefit from any upturn in market conditions."
At 1414 GMT, shares in United Carpets Group were down 8.57% at 4.8p.