Carpetright saves 300 jobs after founder returns to the floor

Lord Harris of Peckham, who built Carpetright from the ground up 35 years ago, has signed a multimillion pound deal in order to save it.

Tapi, a rival flooring chain that he co-founded later, purchased the Carpetright trademark, intellectual property, and 54 stores, as well as a pair warehouses, in a prepack administration. This will save over 300 jobs.

Carpetright’s Purfleet head office or 200 other stores are not included in the deal, putting about 1,000 jobs at risk.

Harris, also known as “the carpet king”, was 81 when he helped launch Tapi after selling his Carpetright shares in 2014. Harris is a member of the Tapi board and heads its buying team. In the deal, he regained control of Harris Carpets, the first carpet brand of his family, which had been sold to Carpetright.

PwC was looking for a buyer to take over the Carpetright business, which operates from 272 shops, and had filed a notice this month of its intention to appoint PwC as administrator.

Tapi, it is believed, was the only company that made an offer to save both jobs and retail stores. Liquidating the entire business was another option. Tapi stated that saving the entire business was “unviable” because of the large number locations with both stores. This option would have required clearance from competition authorities. Meditor’s owner funds the losses of a large portion of Carpetright stores by taking on additional debt.

Meditor is a British hedge-fund headed by Talal, a 60-year-old asset manager and poker enthusiast. He had decided not to try to buy the business back or put any money into it.

Shakerchi has been criticized for transferring Carpetright’s intellectual property to a Meditor subsidiary called Nestware in December. This would indicate that the owner was preparing for a restructuring of some sort since several months. Tapi also had to buy Carpetright’s Intellectual Property in a separate transaction.

Jeevan Karir (47), the 47-year-old managing director of Tapi said, “Our initial goal was to save Carpetright as a whole.” As we studied the situation in detail, it became clear that the business could not be saved.

“The business is materially losing money for several years, and the owner has a significant amount of debt.” We tried to save as many stores as possible, while keeping in mind the way that any deal would be viewed by the competition authorities. We ended up with 54 stores and 2 supporting warehouses.”

Tapi has promised to give Carpetright employees priority in any new roles it plans to create over the next year. The company has also offered to pay to support those who have had their roles affected by restructuring.

In any pre-packaged administration, it is likely that many customers, suppliers and subcontractors, as well as landlords, will be out of pocket. Tapi, in a rare move, has pledged to honor deposits paid by customers in stores that it acquired using debit cards or cash.

Tapi’s story, which is derived from French carpet, is one of rapid growth. It operated 15 stores in 2016, one year after it was launched. Today, the number of outlets is around 170. William Barker is Tapi’s executive chairman and largest shareholder. He is 35 years old.

Carpetright, one of the largest flooring retailers in the UK has been unable to compete with Tapi for its competitive pricing and product range. Since its founding in 1988, the business model of Tapi hasn’t changed much. It has also struggled to adapt to the shift from retail to online. In April, it was the victim of a cyberattack that rendered its stores unusable for nearly a week.

Carpetright’s annual revenue is believed to have fallen to around £200 million over the last year. This compares to £372.6 millions in the 14-month period up to January 1, 2020, and £493.2 for the 18-month period ending October 31, 2019. The chain owed more than £150 millions in external debt, and lost more than £25,000,000 annually over the past few years.

Harris founded Carpetright in east London, and he stepped down from his position as chairman in 2014. In 2019, the business was delisted by the London Stock Exchange and was purchased by Meditor. The previous year, Meditor had acquired almost 30% of the shares of the company and over £40 million in its debts.

Lord Harris of Peckham’s story is an excellent example of “rags-to-riches” success.

Phil Harris, as a child, helped his father run a market stall in Peckham (south London) by carrying rugs from and to the stall. After his father died, Phil Harris was left to run a market stall in Peckham in south London and two shops in Penge (Kent) on his own.

Plan A wasn’t the plan. He wanted to become a professional soccer player. He had a knack for maths, and a strong entrepreneurial spirit, which allowed him to turn his father’s small market into Britain’s largest carpet and furniture retailer, Harris Queensway. In 1988, he made his first fortune from the carpet industry when he sold Harris Queensway for £69 million.

Lord Harris of Peckham made a career in carpet retail and an enormous fortune.

Harris became one of Britain’s richest men, a member of House of Lords and a regular contributor to the Conservative Party. He was also a board director of Arsenal FC. Harris is a philanthropist who has donated millions to education projects across Britain. This includes the Harris Federation which runs about 50 primary and high schools.

Harris Queensway, which was valued at approximately £450 million in the deal, could have been sold. He could then relax. He built another flooring company instead. In 1989, he opened his first Carpetright branch in Canning Town in east London. By 2007, the company had become Britain’s largest flooring retailer with 500 stores and was valued at £800m on the London Stock Exchange.

After 50 years, Harris sold Carpetright and stepped down in 2014. The company was experiencing declining sales and a number of boardroom changes. The decline in Carpetright’s financial performance was largely due to a loss in its non-UK operations, mostly in the Netherlands.

He wasn’t finished with carpets. He co-founded Tapi with his son Martin. Martin stepped down from the role of chief executive four year ago, and has no ties to the company. Harris Sr. is a Tapi board member and leads its buying team. Charlie, his grandson, is also involved in the business.

According to a close friend and co-worker, the carpet boss who will turn 82 this September still works seven days a weeks, dividing his time between Tapi and the Harris Federation as well as Arsenal and the House of Lords. “He is the most detail-oriented retailer I have ever met and has the best memories. He can recall every carpet and price from years ago. He can also remember all of the staff at the store and spends much of his time helping them with any problems that may arise in their private lives.