Despite a positive start to Q3, and a raft of self-help and growth initiatives, footfall and LFL sales have slumped since Xmas i.e. the important winter trading period. Compared to single-digit positive LFL growth, sales in core Flooring categories have since dipped to -7.1% in the last 3-4 weeks. While some of this might be weather related, the working assumption is the trend could persist through the remainder of the half. Given the impact of operational gearing, guidance is £2-6m FY18 PBT, a £10m downgrade at the mid-point of the range. Cashflow is also likely to be impacted given the w/c dynamics, although our initial assessment indicates there remains material headroom against the RCF; it also has c£60m freehold property backing. The only positive to be taken from today’s warning is that competition will also be struggling, especially loss-making new entrants. Capacity withdrawal could help CPR recapture lost sales and margin, and the subsequent swing back to the P&L could match the level of downgrades.
