Carpetright: Retailers urged to make ‘bold decisions early’ to avoid same fate

Businesses have been urged to make “bold decisions early and “avoid kicking problems down the road” in the wake of reports that Carpetright is on the brink of collapse.

It was reported at the end of last week that the brand is linking up PwC to oversee its entry into administration in a move which would put around 1,800 jobs at risk.

The major carpet and tiling retailer, which is headquartered in Essex, would follow the likes of The Body Shop, Ted Baker and online luxury fashion retailers Matches and Farfetch into insolvency.

Carpetright currently runs around 270 stores across the UK and previously launched a CVA back in 2018 which entailed 81 store closures, rent reductions and business restructuring in order to stay alive. 

Carpetright’s collapse ‘no surprise’

Responding to the news Dave Phillips, senior managing director at FTI Consulting, said: “This announcement is yet another sign of the pressures the UK retailers are facing and the need for increased resilience.

“In recent years, costs for retailers have been rising on all fronts.

“The Ukraine war has driven up energy prices, affecting both production and store operating costs.

“Although supply chain disruptions from Covid-19 may have subsided, global distribution remains unstable and volatile, as demonstrated by incidents like the Ever Given blockage in the Suez Canal and issues in the Red Sea.

“Inflation has impacted everyone, and the additional pressures of wage inflation and increases in the minimum wage have further escalated costs for retailers.

“It is no surprise that businesses strongly tied to the housing market and the feel-good factor of upgrading your home are under significant pressure.

“With the cost-of-living crisis and interest rates slowing the housing market, both sources of demand have been constrained.

“Businesses need to ensure that they are sufficiently resilient to deal with all these challenges, and the unknown, such as cyber-attacks — a constant and often underestimated threat across industries — are best addressed by robust defences upfront than by a rapid response.

“Retailers shouldn’t assume the market will return fast or that costs will reduce.

“They need to make bold decisions early and avoid kicking problems down the road, particularly regarding their store estates, store operations and organisational complexity.”

In its most recently filed set of accounts, for the 14 months to January 1, 2022, Carpetright reported a revenue of £372.6m, down from £493.2m in the prior 18 months, while its pre-tax loss was cut from £64.3m to £23.1m.

Its accounts for 2022 were due to be filed with Companies House by the end of 2023 but are late.