Carpetright profits plummet, but Navision pays off

Flooring retailer Carpetright reported lower group revenues and a sharp drop in pre-tax profits today, but successfully rolled out Microsoft Navision.

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Flooring retailer Carpetright reported lower group revenues and a sharp drop in pre-tax profits today, confirming a trend that will see retailers report negative revenues in 2009 and begin to investigate driving customers towards mobile commerce.

But a £4.7 million roll out of Microsoft Dynamics Nav software has helped the retailer reduce its head count and could cut costs.

The software, formerly called Microsoft Navision, integrates with an existing SAP platform to manage in-store customer orders, quotes, stock management and electronic point of sale offers. It was rolled out in October, on time and on budget. It is hoped that the system will cut costs, improve the communications between warehouses and head office as well as improve the supply chain.

Carpetright reported total revenues of £236.8 million in its interim results for the 26 weeks to 1 November 2008, down from £251m for the same period last year. Profit before tax was slashed from £27.2m in 2007 to £8.8m. The UK saw the largest reduction in operating profit, down by 67 per cent compared to a decrease of 29 per cent in its European operations. The retailer, which sells vinyl and laminate flooring, carpets and rugs, reduced the interim dividend by 80 percent to 4 pence and said recent trading had been poor.

Chairman and chief executive Lord Harris said, “I expected my 51st year of selling carpets to be extremely challenging, and it has proved to be the case.” He said the company will “exert tight controls over all costs, capital expenditure, stock and cash flow.”

Recently, IT vendor analysts Gartner predicted hardships for the retail sector. In 2009, capital expenditures will be cut by as much as 50 per cent, by half the world's top ten retailers, Gartner predicted.

John Davison and Mim Burt at Gartner stated that brick-and-mortar retail channels will be “revenue-negative” whilst online will be revenue-neutral in 2009.

However, retailers are likely to invest in technologies such as mobile commerce platforms and software-as-a-service (SaaS). SaaS technology will be adopted by 25 percent of the market, according to Gartner. The analysts also predict a leading retailer to announce that mobile retailing will be driving 20 per cent of customer purchases by the end of 2009.

 
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