Carpetright on brink of collapse as retailer seeks buyer

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Carpetright is facing a potential shutdown as it looks for a buyer, raising concerns about the fate of numerous positions at the British carpet company.

The UK-based store chain, with 272 locations and a workforce of 1,852, announced on Friday its intention to appoint administrators through the High Court. They pointed to a cyber attack in April as the cause of disruption to their business restructuring efforts.

Kevin Barrett, the CEO of Nestware Holdings which is part of the Meditor Group that owns Carpetright, stated that their main priority is to secure outside funding in order to minimize the impact on both customers and employees.

In April, hackers managed to hack into the computers at the offices in Essex of several companies. This caused problems for Carpetright, as it prevented access to their systems and caused some difficulties in carrying out business both in-store and online. As a result, the company experienced some temporary setbacks in trading, impacting their financial results, according to a statement from a spokesperson for the company on Friday.

PwC is expected to take charge of the administration, but they haven't been officially chosen yet, as per someone who knows about the situation. This notice is aimed at stopping creditors like suppliers or landlords from trying to get any money for 10 days before administrators are officially appointed.

The company stated that it has started positive discussions with potential partners that are heading in the right direction, giving them hope that Carpetright has a sustainable future.

The decision is being made because stores that focus on selling optional items like furniture are struggling. DFS, the biggest UK seller of living room furniture, recently lowered its profit predictions by almost half due to very low consumer interest in buying upholstery.

Carpetright was founded by Philip Harris in 1988 with the opening of its first store in east London. The company quickly grew and became publicly listed on the London Stock Exchange in 1993. By the end of 2006, Carpetright was operating 246 stores nationwide.

However, the company has faced challenges in recent years due to tough business conditions and an abundance of stores, as well as increased competition from Tapi, a private company supported by Harris and previously managed by his son Martin.

Tapi grew quickly with financial support from Harris and other affluent individuals like DFS founder Graham Kirkham. They frequently focused on areas where Carpetright stores were already established.

In 2020, Carpetright, which had been giving out alerts about its low profits, was acquired by Meditor, led by former fund manager Talal Shakerchi. The deal valued the company at £15.2mn and caused it to be removed from the London Stock Exchange.

However, the challenges persisted. The company recently revealed their intention to lay off over a quarter of their employees and started a strategy to significantly decrease expenses.

Also, Laura Onita contributed to the reporting from London.