Carpetright is for sale, which could result in hundreds of closures of stores and the loss thousands jobs.
PwC has been appointed to launch the formal sale process by the flooring retailer. The company, which has over 3,000 employees and operates from 300 stores, is struggling due to a decline in demand and increasing competition.
There have been no formal bids yet. Sources claim that the sale will likely be completed by a restructuring process, such as pre-pack administration, company voluntary arrangements, or a combination of both. This could leave suppliers, customers, subcontractors, and landlords with no money. Carpetright works with Westex, Ulster Brintons, and Kahrs.
Teneo, a restructuring expert, was contacted by the retailer to investigate cost-savings measures.
Kevin Barrett, Carpetright’s chief executive told his staff that the sale would “progress rapidly as all parties focus their attention on achieving a solution for the company and implementing the turnaround strategy.”
Carpetright, one of the UK’s largest flooring retailers, has recently been struggling as customers have shifted from carpets to harder floors. It has also suffered due to the shift of bricks-and-mortar shops towards online retail.
According to industry sources, intense competition by rivals like Tapi has not helped. Tapi, founded by Martin Harris whose father Lord Harris founded Carpetright and opened dozens stores right on Carpetright’s doorstep, was founded in part by his father, Lord Harris of Peckham. Martin Harris left Tapi but Lord Harris and Charlie Harris continue to hold positions of leadership within the company.
Carpetright’s finances were once again squeezed in April, after a hack rendered it unable to conduct business across all of its stores for nearly a week. Hackers targeted the chain’s head office in Purfleet (Essex) and sent malware for unauthorised access.
Sources claim that the annual revenue has dropped to around £200 million. This compares to £372.6 millions in the 14-month period leading up to January 1, 2020 and £493.2 millions in 2010.
Carpetright began as a small shop in East London in 1988, founded by Philip Harris – later Lord Harris – who retired as chairman in 2014.
The company delisted in 2019 from the London Stock Exchange after being bought by Meditor, a British hedge-fund headed by Talal Sharkerchi – the former Old Mutual banker who played poker – which had acquired almost 30% of the shares of the firm and over £40 million worth of its debts a year earlier.
In 2018, the retailer was forced into a voluntary company arrangement (a type of restructuring) to close underperforming stores and reduce rents.
After its credit coverage was reduced during the CVA, it has had difficulty obtaining insurance. Trade credit insurance covers suppliers from the risk that a retailer will go bust in the time between when an order is received and payment. When the cover is removed, suppliers may demand upfront payment. This can squeeze a retailer’s financial resources.
Carpetright’s struggles are another low point in Britain’s battle to survive. The Body Shop collapse, Wilko’s bankruptcy and Paperchase have all led to the closure of hundreds of stores in the last year.
Post Disclaimer