Retail health in spotlight as HMV and Carpetright report

Floor coverings specialist Carpetright has found itself at the forefront of the economic storm currently battering the high street.

The group, founded by Lord Harris of Peckham, has issued three profit warnings already over the past 12 months and said in April that its full year profits, which are due to be released tomorrow, will be just below the £17m it made in 2009.

The firm added it was absorbing rises in the wholesale prices it is paying, rather than passing them on to customers, but even then same-store sales fell by 6.3 per cent in the UK and Ireland over the 11 weeks to April 15.

Recent official data suggest little change in the mood of the consumer since April, with latest retail sales figures showing a sharp decline after a boost around Easter and the Royal wedding.

Carpetright’s fortunes are also tied closely to activity in the housing market, which has been subdued this year.

The group has moved into new markets, with 230 shops now selling beds, to try to widen its sources of income, while also cutting its cost base through job cuts and some store closures as leases expire.

Carpetright, which has about 560 outlets in UK and Ireland and a further 120 in the Netherlands and Belgium, has also said it will look to expand further in northern Europe if good opportunities arise.

John Stevenson, analyst at broker Peel Hunt, says Carpetright needs a recovery in housing activity for UK trading and underlying profits to improve and he expects trading to remain subdued until that happens.

He is predicting adjusted profits of £16.3m and sales of £493m for the year and little change in the year to the end of April 2012.

Beleaguered music retailer HMV Group will reveal how it has been affected by the high street’s woes on Thursday.

Simon Fox, HMV chief executive, bought himself some breathing space in attempts to the turn the group around with the recent sale of book chain Waterstone’s for £53m.

That disposal will trigger a crucial £220m refinancing, but the terms include an interest rate of four per cent above current market rates and an exit fee of up to 14 per cent if part of the loan has not been repaid by January 2013.

HMV has struggled to cope with falling sales of CDs and DVDs as more consumers shop online and supermarkets compete for business.

In April, HMV revealed like-for-like sales at its UK and Ireland stores fell by 18.8 per cent in the 17 weeks to the end of that month.

The group has now turned to selling more technology, such as MP3 players, iPads and mobile phones, and building up the live events division to halt its decline.