The gloom on the high street deepened on Wednesday as struggling Carpetright said it was set to close stores, Moss Bros issued a stark profits warning, B&Q reported falling sales, Mothercare said it remained in talks with its bankers and New Look’s creditors voted to slim down the struggling fashion retailer.
Carpetright, Britain’s biggest carpet retailer, did not reveal how many outlets might shut, but it is believed to be considering axing up to a quarter of its 409 UK stores. A decision is expected in the next few weeks. It said the closures were needed to address the “legacy property issue” resulting from overexpansion under its previous management.
The company is considering a company voluntary arrangement (CVA), a process designed to stave off insolvency by closing stores and negotiating lower rents with landlords. It has arranged an emergency short-term loan of £12.5m from shareholder Meditor in return for an additional 5% stake and also wants to raise between £40m and £60m through an equity issue.
Carpetright has issued a series of profits warnings in recent months, sending its shares sharply lower. At their current level of 41p, the business is valued at less than £30m.
The potential Carpetright closures come as fashion retailer New Look’s creditors met on Wednesday afternoon, with 98% voting for a CVA that will involve the closure of up to 60 of its 593 stores and rent reductions on dozens more.
Landlords leaving the meeting expressed frustration at taking a financial hit and feared more retailers would follow the same route as New Look. Several said they were worried the CVA would not solve New Look’s problems. The retailer has debts of £1.2bn against sales of £1.4bn last year.
One said: “This is a chronically badly-run business. It’s a difficult climate out there but to load up a retailer with this sort of debt is just crazy.”
Clothing suppliers at the meeting expressed relief that the chain would live on. One said: “It’s a sensible CVA. New Look has continued to pay suppliers on time and that gives it the best chance of survival.”
There was grim news from another clothing retailer, Moss Bros, which warned that profits for the coming year were likely to be “materially lower than current market expectations”. The company’s shares crashed 23% to 45p as it said the suit hire business was “challenging” and that the number of shoppers on the high street remained lower than hoped, “reflecting a more cautious consumer environment”. The company also admitted that sales were affected by stock shortages after Moss Bros made changes to the way it sourced clothing in an attempt to offset Brexit-driven inflation in costs.
At B&Q, which is owned by Kingfisher, sales dropped by 5.1% as the chief executive, Véronique Laury, described the outlook for the UK as “uncertain”. Kingfisher’s profits for the year to end January were down by 10% to £682m.
The slowdown at Kingfisher comes despite troubles at its major competitor Homebase, where sales have slumped since a botched takeover by Australian group Bunnings. The group is considering closing as many as 40 stores putting hundreds of jobs at risk.
Meanwhile, Mothercare, the struggling mother and baby retailer that is in talks with its banks, has been given more time to secure extra funding. Its lenders have deferred key tests of its financial covenants – which had been due on Saturday – until May. The retailer said talks on the terms of its existing loans were “progressing constructively” and it hopes to reach agreement by mid-May when its results are due.
“Retail Black Wednesday: the sequel,” said Patrick O’Brien, the UK retail research director at market research firm GlobalData. “Just three weeks after the administrations of Toys R Us and Maplin were announced on the same day dubbed ‘Black Wednesday’, it appears the sequel is already upon us, with Moss Bros, Carpetright, Mothercare and New Look all being in the news for the wrong reasons.”
Slowing consumer spending, rising costs and the switch to buying online have bitten down hard on retailers in the past six months, with businesses including electronics store Maplin, children’s specialist Toys R Us, furniture retailer MultiYork and bedmaker Warren Evans calling in administrators and putting thousands of staff out of work.
Expensive homeware such as sofas, kitchens and carpets have been hit particularly hard as the housing market has slowed.
Department stores House of Fraser, Debenhams and Marks & Spencer are either reducing the size of stores or closing them as they try to adapt to changing shopping habits.
The recent cold weather also hit trade for many retailers, with sales at John Lewis down 14% that week, while Ocado warned on Tuesday that it took a £1.5m profit hit from the “beast from the east”.
