Carpetright PLC (LON:CPR) could be on the brink of joining the recent list of collapsed retailers after it revealed it is in talks with banks on how to shore up its balance sheet as it issued its third profit warning in four months, sending it shares down 25% in early trading.
In a trading update, Britain's biggest floor coverings retailer forecast reporting a small underlying pre-tax loss for the full-year and said trading conditions have remained difficult, characterised by continued weak consumer confidence.
READ: Carpetright shares dive as falling consumer confidence hammers sales
The FTSE Small Cap-listed firm said that while the trend in like-for-like UK sales has improved, it remained negative.
It added that trading in the rest of the Europe division had also improved, led by a recovery in like-for-like sales in the Netherlands.
Carpetright said it 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.”
The firm said: "Lenders have indicated that they currently remain fully supportive.”
Other options under review
Carpetright added that other unspecified options to accelerate a turnaround were also under review.
A drop in sales due to "difficult" consumer confidence had led the retailer to last warn on full-year profit in January.
On Wednesday, high street electronic products retailer Maplins and toys giant Toys R Us both fell into administration.
In late afternoon trading on Thursday, Carpetright's shares were 22,9% lower at 60p.
Neil Wilson, senior market analysts at ETX Capital commented: “Weaker consumer sentiment for big ticket items is a factor, as well 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.”
He added: “Carpetright is also a business that probably hasn’t quite adapted to the changing retail landscape quite as fast as it might – out of town retail parks just aren’t the place to be these days.
“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.”
-- Updates share price, adds analyst comment --