Carpetright Plc (CPR) said Chief Executive Officer Darren Shapland quit amid a further deterioration in sales that will cause profit to be “significantly below” the U.K. retailer’s projections, sending the shares down 15 percent.
Shapland, who returned to the business in May last year to succeed founder Philip Harris, stepped down after informing the company he couldn’t commit to staying until the end of his five-year contract, Harris said on a conference call today. The departure leaves 71-year-old Harris back in charge of the company he started in 1988 with a store in London’s East End.
Shapland’s exit is “highly surprising,” though “appears to be unrelated to the deterioration in trading,” John Stevenson, an analyst at Peel Hunt in London, said in a note.
Carpetright said today that a sales decline in the U.K. has worsened since its last update in July, while weakness in the Netherlands is hurting performance in the rest of Europe. The deterioration further reduces the retailer’s chance of reversing three years of declining sales. Before today, analysts had expected a 1.4 percent increase for the year through April, based on the average of eight estimates compiled by Bloomberg.
The shares fell as much as 15 percent to 570 pence in London, the steepest drop since March 23, 2010. The stock was down 10 percent at 603 pence as of 9:42 a.m. local time.
Harris, who becomes full-time executive chairman, said in a statement he was “disappointed” that Shapland is leaving.
Shapland was in his second stint at Carpetright, which he originally joined as finance director in 2002. He left in 2005 to become chief financial officer and later group development officer of supermarket chain J Sainsbury Plc (SBRY), before returning last year with the intention of succeeding Harris.
Harris said he will be “working with the board to develop longer-term management succession arrangements.”
The founder will be assisted in running the company by Graham Harris, a former Tesco Plc (TSCO) executive who joined Carpetright as trading director this year. Graham Harris, who isn’t related to the chairman, will join the board and become chief operating officer, Carpetright said today.
Sales at U.K. stores open at least a year fell 2.5 percent in the 10 weeks ended Sept. 29, the retailer said. The gross profit percentage improved 140 basis points in the first half.
The sales slump caused analysts to cut their full-year earnings estimates. Peel Hunt’s Stevenson now expects pretax profit of 9.1 million pounds for the year through April, down from his previous projection of 14 million pounds.
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