Daily Mail share tips: Carpetright

By IAN LYALL FOR MAILONLINE
Updated: 07:26 EST, 1 July 2009

Company: Carpetright
Event: Full-year results
Profits: £16.7m (-72%)
Dividend: 8p (-85%)
One-year share price performance: - 9%

Lacking confidence: Stocks in Carpetright look expensive

Boss and founder Lord Harris has been selling carpets for more than half a century and says he has never seen such a dire market.

Full-year underlying sales for the UK and Ireland fell 13.5% and the carpet market itself is down as much as 25%.

Harris doesn't see normal trading conditions returning for at least another year. People are too worried about their jobs to be splashing out on new carpets.

Carpetright as market leader is seen as a survivor, and with the Harris family holding 30% of the shares investors can be sure the chairman will be doing all he can to improve sales.

In the meantime, Carpetright is in a strong position to benefit from any collapse of rivals. But the size of the dividend cut underlines the lack of confidence in the economic outlook.

And if Harris sees no reason for the market to improve for another 12 months, it is hard to see why investors would want buy the retailer's shares. The stock looks expensive.

Broker Oriel Securities says it is trading on 36.5 times 2009-2010 earnings.

Our verdict: Sell