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Review launched as United Carpets considers future

United Carpets has cancelled a number of its franchises and is considering the future of a number of other stores as a consequence of the difficult High Street trading conditions.

The Rotherham-based carpet and floor covering retailer said it was to undertake a review of its store portfolio in order not to create "an unsustainable financial burden on the group".

United Carpets, which saw half year pre-tax profits cut by more than half to £267,000, said that at this stage it is uncertain whether any actions taken will have an impact on its annual results but that a "detrimental effect" was likely.

In a trading update for the year ended March 31 and subsequent period, United Carpets said it had been hit by factors including uncertainty surrounding the economic recovery and concerns about the future in Europe.

"As a consequence, apart from occasional, short-lived, promotion-led activity, trading for retailers generally and for 'big ticket' retailers in particular has been extremely challenging," the company said.

United Carpets said that this had resulted in "a significant proportion" of its franchise network finding it "increasingly difficult to operate satisfactorily". Difficulties include meeting their liabilities to creditors and the group.

The group said this weakening in franchise performance was despite better technology being available to franchisees to examine footfall and other factors in order to improve performance, and financial support being made.

United Carpets added: "As a consequence, since the year end it has been necessary to terminate a number of franchises. This is likely to have a detrimental affect on the performance of the group as it is proving increasingly challenging in the current environment to turnaround failing stores."

The group is to review a number of other stores to determine if they can remain viable.

"The purpose of any rationalisation of the group's store portfolio would be to meet the more stringent criteria which it is felt are required to trade successfully in these difficult times and to prevent an accumulation of poorly performing stores creating an unsustainable financial burden on the group."

"Whilst such impact could be material (on its annual results), the board anticipates that, with appropriately adjusted central costs, the continuing core of locations will be able to operate successfully on an ongoing basis."

United Carpets expects to announce its preliminary results in late August.

Source : Ian Briggs – The Business Desk

15 June 2012
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