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Carpetright hit by poor trading in the Netherlands

Carpetright has warned over profits for the second time in less than four months after dire trading in its Netherlands business offset a UK sales rebound.

The floorings retailer saw UK like-for-like sales bounce back with a 1.9% rise in its third quarter to January 25, but said "extremely difficult economic conditions" in the Netherlands would leave it nursing losses in its overseas division.

Despite an expected increase in UK earnings over the full year, the Netherlands hit was now set to see overall profits for the year to April miss City forecasts of between £9 million and £11 million. Shares opened 4% lower today.

The alert marks its second since early October, when founder Lord Harris of Peckham also made a dramatic return to the helm after the shock departure of chief executive Darren Shapland.

Lord Harris, who was formerly non-executive chairman, also cautioned that trading in the UK remains volatile with high street conditions still tough.

He said: "In the UK, the pace of the recovery remains uncertain in the face of continuing sales volatility, but we are confident that our self-help measures have further potential.

"However, with a further weakening of the market in the Netherlands, we now expect underlying pre-tax profits for the full year will be below the lower end of the current range of market expectations."

Carpetright's UK sales rise comes after an 0.8% fall in the half year and follows turnaround efforts including revamping outlets and reviewing the locations of its 473-strong core estate.

It pointed out that falling wholesale trade held back an even bigger improvement in the main retail division, which recorded a 2.5% increase in like-for-like sales.

Carpetright has suffered a difficult financial year, following a marked recovery that more than doubled underlying annual profits to £9.7 million for the year to April 2013.

The woes in Holland have compounded uneven trading since then in the UK, in spite of the wider economic recovery and burgeoning housing market.

While trading was in line across its other international businesses in Belgium and Ireland, overseas like-for-like sales plunged 7.7% due to the dismal performance from the Netherlands, where it has 95 stores.

Freddie George, retail analyst at Cantor Fitzgerald, said core issues with its trading model in the UK also needed addressing.

He said: "We continue to believe that the company's conforming format is not effective enough against the independents.

"It is too focused on price, in our view, and not aspirational enough for mainstream customers."

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