Tough trading not swept under the carpet as Carpetright shares floored

● Retailer enters talks with banks to avoid breaching lending covenants

The severe chill in the high street has continued with the second profit warning from Carpetright since Christmas hammering its share price – 24 hours after Toys R Us and electronics firm Maplin collapsed into administration.

Carpetright jolted the City after it revealed yesterday that it had started talks with its banks to ensure it does not breach its banking covenants and that it now believed it would make a small loss for the financial year to 28 April.

The company said in a stock exchange statement that trading remained under pressure, with like-for-like sales still falling despite a small improvement since January.

The group, which last updated the market on 19 January, said trading remained tough “characterised by continued weak consumer confidence”. It added: “While the trend in the group’s UK like-for-like sales has improved through the intervening period, it remains negative. Trading in the Rest of Europe has also improved, led by a recovery in like-for-like sales in the Netherlands”.

Carpetright added that it was “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”.

It said the lenders had indicated that they “currently remain fully supportive”. Carpetright said it was also at “an early stage” of looking at ways to speed up a trading turnaround and bolster its balance sheet.

Yesterday’s warning came after a “Black Wednesday” for the sector following the collapse of Toys R Us and Maplin, which have put more than 5,000 jobs at risk. New Look and Prezzo are among other chains looking to close outlets in a harsh start to 2018.

Carpetright had sparked an earlier tumble in the shares when it warned over profits and said like-for-like UK sales had fallen 3.6 per cent in the 11 weeks to 13 January. It had also warned over the full-year outlook in December.

Neil Wilson, market analyst at ETX Capital, said it was a “bad week for retail as Carpetright’s woes get worse”.

He added: “Weaker consumer sentiment for big-ticket items is a factor, as well as tougher competition from a more diverse marketplace.

“Meanwhile, the slowdown in the property market means people are moving less often and therefore upgrading soft furnishings less often – the less often people move, the less often they purchase a new carpet. Carpetright is also a business that probably hasn’t quite adapted to the changing retail landscape.”