Major developments in the UK carpet industry have shaken news headlines this July.
In the first, carpeting giant Carpetright announced it had taken pre-emptive steps by filing a notice of intention with London's High Court, signalling its readiness to appoint administrators. This move was the result of urgent efforts to secure new investment and avoid insolvency, potentially losing 1800 jobs.
Today, a twist in the dilemma has seen Carpetright's major competitor Tapi Carpets & Floors eyeing for the acquisition of Carpetright, following the company's plans for administration.
The potential sale, likely structured as a pre-pack administration deal, aims to preserve hundreds of stores and jobs. But at the same time, it would mean a large competitor of Carpetright would take over more than half of its UK stores.
Photo: Dreamstime.
Also this week, the UK carpet and sofa retailer ScS, originally known as Sofa Carpet Specialist, released news it had ceased selling flooring and carpets following its acquisition by Italian furniture retailer Poltronesofà. Flooring has accounted for 8% of ScS's overall revenue, but despite investments, the retailer has struggled to increase its market share in this category.
What happened at Carpetright?
Carpetright initially denied plans for another Company Voluntary Arrangement (CVA), stating it was focusing on enhancing its operational performance with guidance from several advisors. However, its recovery efforts were hindered by a cyberattack that occurred during the same period. This attack paralysed both online and in-store operations for nearly a week and also disrupted access to essential payroll data for staff.
The incident exacerbated the company's financial challenges. In response, Carpetright decided to reduce costs by cutting its head office staff by 25%, totalling approximately 70 employees. This measure aimed to trim £22 million from its cost base, reflecting the company's urgent need to stabilise amidst ongoing operational disruptions and financial pressures.
Carpetright's sales dropped by 24% to £372.6 million during this period, mentions Retail Gazette. Meanwhile its competitor Tapi, founded in 2014 by Martin Harris, son of Carpetright's founder, saw sales increase by 27% to £137.4 million in 2021 and another 15% to £158.3 million in 2022.
What's next?
Tapi's growth strategy involved opening stores near Carpetright locations and hiring away its staff, leading to a shift in market share. From 2015 to 2021, Tapi gained 7.3 percentage points in UK market share, while Carpetright's share fell by 5.1 points to 15.1%. The Tapi takeover, combined with the news of ScS would strengthen Tapi's position in the market even further.