Financial Analysis
Carpetright bills itself as Europe's "leading specialist carpet and floor coverings retailer." The company earns most of its revenue in the United Kingdom (80.1%) with the remainder coming from operations in Ireland, Belgium and the Netherlands. The group opened its first store in 1988 and now has 632 stores and over 3300 employees. This report is going to be a comprehensive analysis of Carpetright's financial situation.
Five Year Summary
Yahoo! Finance (2012) provides data for the past four years. Carpetright has seen volatility in its revenues over this period. In fiscal 2007, the company had revenues of £476 million, and this past year revenues were £471.5, so very little change. The company has added nearly 100 stores in that time, so the average sales per store has declined. The company's sales grew in 2008, fell in 2009, recovered in 2010 and then fell again in 2011 with the new recession. The carpet business is correlated with activity in the housing markets and the state of the economy in general. Chairman Lord Harris of Peckham noted in his annual statement that he had expected challenging trading conditions in the past year and the decline in revenues bears that out.
3.2
The company's profit in 2012 was £11 million. This figure is the weakest in the past five years. While Carpetright has remained profitable through the poor economic conditions, it made £46 million in fiscal 2007. 2008 was also a successful year with £43 million in profit, but the difficult 2009-year saw profits drop to their current range for the past three years. The company will be challenged to restore profit margins to the pre-2008 levels once the trading conditions improve.
Year
Operating Profit
Change (%)
Net Profit
Change (%)
2008
£54
£43
2009
£22.3
-58.7%
£11.8
-72.5%
2010
£28.2
Income Statement
5.1
Though Carpetright has remained profitable through this challenging time, it has seen its profitability decline overall. The gross margin in fiscal 2012 was 58.5% and in 2011 it was 61.2%, 61.1% in 2010 and 61.2% in 2009. The slight decline last year reflects a decline in pricing power as the company discounted in order to move out inventory. Faced with high operating costs, the operating margin was just 3.8% in 2012. In 2011 it was 2.2%, but in 2010 it was 5.45% and in 2009 it was 4.6%. These figures indicate that Carpetright's costs have increased faster than its revenues. However, it speaks well to the company's financial management that after predicting a difficult 2012 the company cut overhead costs and increased its operating margin. The net margin is a reflection of the net profit, which has been poor for three years running. In 2012, net margin was 2.3%, whereas four years ago it was 2.4%.
5.2
The percent annual change in revenue from 2011 to 2012 was a…
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