Rainham, England, October 25, 2005— Britain's biggest carpet seller, Carpetright posted a 6.7% drop in first-half underlying sales on Tuesday as shoppers kept their wallets closed and higher spending on promotions trimmed margins.
But the firm, which has a big presence in Belgium and the Netherlands, said that while it did not know when the retail downturn might end, it was still taking market share from rivals.
Carpetright shares fell as much as 3.4% in early trade but recovered to 894p by 10:28 a.m., valuing the business at 606 million pounds. The stock remains near a four month low of 865p seen early this month.
"We think we're doing everything right, but when things are down you've got to look at other options -- and that's what we tried to do when we reduced our prices," Harris added.
Carpetright said its prices were still on average 15% cheaper than its main competitors and that margins, while slightly lower in the first half, were still good.
"There are a lot of companies that would like a net 13%-14% margin -- and we're getting there in a bad time," Harris said.
The company said a higher spend on special promotions had shaved gross margins, but it reiterated its expectation of a full-year improvement.
Carpetright said total sales for the 25 weeks to October 22 were down 6.2% and 6.7% lower on a like-for-like basis. It said its European business was still making good progress, with total product sales in local currency rising by 7.1% market share improving.
Analysts were unexcited by the report.
Investec Securities said it was keeping its "hold" stance, highlighting the firm's positive efforts at growing its share in a tough market and said trends should improve early next year.
Seymour Pierce analyst Richard Ratner moved his stance from "hold" to "underperform". Assuming that margins are held in the second half and like-for-like sales are flat, Ratner now sees full year profits of 55 million pounds, down from 63.2 million.
Carpetright said its interim results are due to be published on December 13.
