Embattled flooring retailer Carpetright PLC (LON:CPR) is to press ahead with its restructuring plans after raising £15mln through a loan from its largest shareholder.
Last month the company got the backing of its shareholders and creditors through a company voluntary arrangement (CVA), on the condition that it secured the £15mln financing.
READ: Carpetright receives shareholder backing for CVA
READ: CVAs explained
With the money now in the bank thanks to Meditor Capital Management – which owns 29.99% of Carpetright’s shares – the retailer can start to implement its turnaround strategy.
Among the drastic plans, Carpetright plans to close 92 of its worst-performing stores, slash the rent on its remaining 113 sites and cut 300 jobs.
“These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents and are essential if we are to restore our profitability and deliver a successful turnaround,” said chief executive Wilf Walsh last month.
Carpetright also plans to raise a further £60mln through a share placing and open offer, likely to be launched on May 18, and confirmed today that this is still the expectation.
That cash injection will be used fund the turnaround plans, reduce debts and cover costs associated with the CVA. It will also allow the firm to repay a previous £12.5mln loan it obtained from Meditor.
Challenging market
Back in March, Carpetright – which was founded by Lord Harris of Peckham 30 years ago – issued its third profit warning as it blamed weak consumer confidence for a drop-off in sales.
It repeated in last month’s update that conditions “have remained difficult” and added that it still expects to report a “small” underlying loss for the year to April 28.
Like many retailers, Carpetright has struggled to adapt to changes in the way we shop. Online shopping is becoming increasingly popular which is leaving many high streets deserted.
On top of that, the company – along with its direct rivals – is having to deal with fewer homeowners moving houses, which is typically when they spend big on things like new carpets and curtains.
The brutal combination of above-target inflation and stagnant wage growth also means people are delaying plans to redecorate.
Carpetright shares were broadly flat at 39.5p on Friday morning.