Carpetright – Lord Harris finally bows out.

Last week (on 21/5/2014), Lord Harris announced that he was leaving the board of Carpetright where he has been Executive Chairman since last October when his succession planning went awry. Lord Harris had been running Carpetright and similar businesses selling carpets for over 50 years. Darren Shapland had been appointed as Chief Executive with Phil Harris stepping up to non-executive Chairman but Shapland left abruptly after three profit warnings. It is of course never ideal when a former Chief Executive moves to Chairman particularly when he controls a very large shareholding in addition (the Harris family own over 20% and Phil Harris also had his son, Martin Harris, on the board as Development Director).

Lord Harris is now leaving the board altogether in September and a new Chairman is being sought. In addition Martin Harris is leaving the company. A recently appointed COO is also departing. New recruit Wilf Walsh is to become Chief Executive.  Mr Walsh does not appear to have much knowledge of the furnishings retail sector but he did get retail experience at HMV – whether that well qualifies him for this position is perhaps debateable.

However as this writer said in October 2013, “yes it’s surely time for real change at Carpetright rather than a reversion to the old guard“. It looks like the board, no doubt supported by investors, have finally bitten the bullet on this issue.

With Lord Harris at age 71, and as a former shareholder in this company (and past employee in a previous company), this writer could see that reviving this business was not going to be easy and a new broom was probably required.

The carpet market remains very tough and because of the structure of the business, Carpetright is operationally geared. As a result profits have been in the doldrums for some time. Despite that the company’s share price has held up remarkably well, presumably based on prospects of recovery. But with a prospective p/e of over 100, and the risk of a share overhang if Lord Harris chose to sell some of his holding, they are looking very vulnerable.

Let us thank Lord Harris for his past business successes and his current charitable activities (where no doubt he will be able to spend more time now), but it was time to move on.

Roger Lawson

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