United Carpets ‘recovered ground’ with 24% like-for-like sales growth

The UK’s third largest carpet and floor coverings retailer, United Carpet group (AIM:UCG), said that it had ‘recovered much of the ground’ it had lost during lockdown, in the 19 weeks of trading to October 1 2020.

Since its 56 stores reopened on May 22, the company said that trading had been ‘robust’, with strong demand seeing like-for-like sales increase by 23.8% for the 19 weeks to October 1.

United Carpet Group added that this activity meant that it has ‘recovered much of the ground lost during lockdown’, where its stores closed for over 8 weeks, and it generated ‘virtually no’ revenue.

The Group continues, saying that its financial position remains strong, including £2.0 million relating to the Coronavirus Business Interruption Loan, and £1.1 million in deferred payments – facilitated by PAYE, NI and VAT support measures.

As a result, the company said that it believes it has sufficient cash to support it through ongoing pandemic challenges, though the COVID support loan means that it will not be paying dividends to shareholders.

Speaking on the company’s summer trading, Paul Eyre, Chief Executive, said: “Since our stores were allowed to re-open, we have been encouraged by a strong period of trading. Customers appear to have been making up for the purchases they would have made during lockdown, with an increased focus on home improvements. Looking ahead, however, there are a number of significant, potential headwinds facing our sector and the UK economy in general.”

Mr Eyre states that Christmas has historically been a period of strong activity. However, he sees Brexit as a risk factor which may see the introduction of tariffs on raw materials, and hamper consumer sentiment.

Further, COVID is likely to see further restrictions on people’s freedom to travel and trade as normal, and may also result in further raw material shortages. Further, in 2021, an economic slump and unemployment is likely to cause a ‘challenging retail environment’.

Despite this, Eyre states: “Nevertheless, we have a strong balance sheet, with appropriate financing, and the Board therefore believes that the Group is in a good position to navigate its way through the anticipated challenges.”

Following the largely positive update, United Carpet Group shares bounced by 38.46%, or 1.25p, to 4.50p a share 26/10/20 12:55 GMT. This is short of its year-to-date high of 6.13p, but well above its six-month nadir of 2.75p.

The company’s p/e ratio is 6.37, and it has a 65.97% ‘Outperform’ rating from the Marketbeat community.