Carpetright at the Abyss: Rescue or Ruin?

The British carpet retailer Carpetright is on the brink of collapse and is urgently seeking a buyer to secure the survival of hundreds of jobs. The company, which operates 272 stores and employs 1,852 staff in the UK, has initiated proceedings in the High Court to appoint administrators. The reason for this is a software attack in April that severely affected the planned restructuring measures. Kevin Barrett, CEO of Nestware Holdings, a part of the Meditor Group to which Carpetright belongs, emphasized: “We remain focused on securing external investments to ensure that as few customers and colleagues as possible are impacted.” Hackers infected the company's computer systems in its Essex offices in April. This attack restricted access to Carpetright's systems and led to short-term trading disruptions, as the company could neither operate online nor in stores. These developments significantly impacted the business results, according to a spokesperson for the chain on Friday. The consulting firm PwC is prepared to take over administration but has not yet been formally appointed. The filing of the insolvency petition aims to ensure that creditors such as suppliers or landlords cannot file claims for ten days before a formal administrator is appointed. Carpetright stated that promising talks with interested investors are underway, moving in the right direction and offering hope for a sustainable future for the company. This move comes at a time when retailers specializing in discretionary spending face challenging markets. For example, DFS, the UK's largest furniture retailer, lowered its profit expectations by almost 50 percent just last month. Demand for upholstered furniture is at an all-time low. Carpetright was founded in 1988 by Philip Harris and expanded rapidly, leading to a stock market listing on the London Stock Exchange in 1993. By the end of 2006, the retailer operated 246 stores nationwide. However, in recent years, difficult trading conditions and an excess number of stores have heavily impacted the company. Competition from Tapi, a private company supported by Harris himself and led by his son Martin until early this year, further exacerbated the situation. Tapi expanded rapidly, supported by Harris and other wealthy investors like DFS founder Graham Kirkham, frequently targeting locations where Carpetright was already present. In 2020, Carpetright was acquired by Meditor, led by former fund manager Talal Shakerchi, following a series of profit warnings, valuing the company at £15.2 million and leading to its delisting from the London Stock Exchange. However, the problems persisted. Just last month, the company announced plans to cut over 25 percent of its workforce and drastically reduce costs.