Nosedive for shares in Carpetright and Mothercare as high street trading worries loom.
Fears surrounding the futures of Carpetright and Mothercare have caused shares to plunge. There was a 14% slump in Carpetright after a report suggesting it would have to close stores and cut jobs, and Mothercare fell almost 12% in the midst of an ongoing store closure programme. This all comes as the High Street slowdown continues, causing a number of big businesses to downsize or go bust.
Poor Trading Numbers
Carpetright has 409 stores in the UK, but its outlets have been underperforming and rental costs have become difficult to shoulder. Earlier in March, the company had warned of a swing to a full-year loss, and it now says “a range of options” are being explored to increase business, but a final decision on the future has yet to be made.
Similarly, Mothercare announced earlier in March that poor trading had put it at reach of failing to meet loan conditions. Its plans are to cut store numbers to 80 from 140. The brand is a weaker performer in a sector that is really struggling, so the drop in shares is not surprising.
The High Street Crisis
Brick-and-mortar retailers are suffering from increased overheads, declining consumer demand and the rise of online shopping.
During the good years, many retailers embarked on expansion programmes that were based on loans, which has left them dangerously exposed in the current retail climate. Only last week, Toys R Us announced its reluctant decision to close all UK stores, and electronics retailer Maplin is in the same boat.
Furthermore, retail outlets Bargain Booze and Wine Rack, which are owned by Conviviality, revealed last week that they had failed to put aside over £30m for a tax bill, and the Conviviality CEO is consequently stepping down. The company is also a leading drinks wholesaler, and is attempting to weather the crisis with a caretaker CEO for the foreseeable future.
The result is the painting of a larger picture that ultimately suggests high street retail outlets are not a reliable investment in the modern climate. There may be newer, more innovative companies that arise from the rubble, but the current pattern is seeing many established, household retail names falling by the wayside.