Carpetright has been saved from crashing into administration by rival firm Tapi, as part of a multi-million pound rescue deal set to be finalised in a matter of hours.
The struggling chain, set up by Peckham ‘carpet king’ Lord Harris, was on the brink of collapse with about 1,800 jobs at risk of being lost.
But Tapi – which was founded by Lord Harris’s son, Martin Harris – has now agreed to buy 54 of the ailing chain’s 270 stores and two warehouse, saving 300 jobs.
However, the deal does not include some 200 other stores which now face the risk of closure, with more than 1,500 staff in the firing line.
It’s understood Tapi was the only competitor to have made an offer that included saving both jobs and stores.
Carpetright has been saved from crashing into administration by rival firm Tapi, as part of a multi-million pound rescue deal (file image)
Since it started business operations, Carpetright’s main rival Tapi has grown quickly and now has more than 150 stores, alongside a website and delivery service
Jeevan Karir, managing director of Tapi said: ‘Our goal, initially, was to try to save all of Carpetright.
‘However, as we looked into the details of the situation, we quickly established that saving the entire business was unviable.
‘The business has been materially loss-making for a number of years, and it has significant debt held by the owner.’
Administrators at PricewaterhouseCooper (PwC) were put on standby as Carpetright sought a ‘period of protection’ to secure additional investment.
Carpetright, which is owned by Nestware Holdings, has struggled against competitors Tapi.
The company, which is one of the nation’s biggest floor-covering retailers, has suffered weaker demand for carpets as homeowners shifted towards hard flooring.
It was also hit by a major cyber attack in April which halted trading, with the firm saying the incident had impacted sales and affected attempts by the company to restructure its operations.
Following a turbulent few months, Carpetright eventually filed a notice to appoint administrators two weeks ago, on July 12.
Kevin Barrett, chief executive of Carpetright parent firm Nestware Holdings, said: ‘Our focus over the last week has been to secure external investment to ensure job security for a number of our Carpetright colleagues up and down the country.
Carpetright, one of the country’s largest retailers for floor coverings, has been saved – but 200 of its stores and hundreds of staff could be lost as part of the rescue deal with Tapi
The primary problem facing the company has been slowing customer demand across the furniture and homeware industry. Pictured: A Carpetright store in south London in 2017
‘Whilst we succeeded in finding a buyer, the deal is limited to a select number of stores rather than the business as a whole and will sadly impact a large number of colleagues and staff.
‘We have tried everything to turn Carpetright around and I’m truly sorry that we were unable to save more jobs.
‘The deal will not affect Carpetright in Europe or other brands within Nestware Holdings including Keswick and Trade Choice.
‘The Floor Room will continue to trade and serve customers via concessions at John Lewis and we will be working hard to secure job opportunities across these businesses to support Carpetright staff wherever we can.’
The company has been no stranger to difficult times, having gone through a form of insolvency proceedings six years ago to cut costs.
At the time, it was forced to close 81 stores after reporting a full-year loss of over £70million.
Another problem for the firm has been new competitors on the market.
Carpetright’s main competitor, floorings retailer Tapi, was created by Martin Harris 10 years ago.
But it was his father, Lord Harris of Peckham, who founded Carpetright when he opened a single shop in east London in 1988.
Lord Harris, now 81, sold all his shares in Carpetright in 2014, and now an investor and adviser in Tapi.
The front entrance to the Carpetright shop in Brentford, 2010
In 2018, Carpetright forced to close 81 stories after reporting a full-year loss of over £70m
Lord Harris of Peckham (pictured in 2000) founded Carpetright when he opened a single shop in east London in 1988
Since it started business operations, Tapi has grown quickly and now has more than 150 stores, alongside a website and delivery service.
Many Tapi stores were opened in close proximity to Carpetright’s best-performing locations, and the up and comer poached many of the chain’s employees, according to Retail Gazette.
Who is Lord Harris of Peckham?
Philip Charles Harris was born on September 15, 1942.
He founded Carpetright when he opened a single shop in east London in 1988, having previously run Harris Carpets.
He was knighted in 1985, and was made a life peer as Baron Harris of Peckham in 1996.
The Sunday Times Rich list in 2006 estimated his wealth as £285m.
Over the years he has donated to a number of causes, including educational institutions and academies.
He sponsors the Harris Federation which runs 55 schools in London.
Michael Gove once wrote an article labelling him a ‘hero’ for saving schools.
Lord Harris has been a longtime donor to the Conservative Party since the 1980s and was a great admirer of Margaret Thatcher, but started donating to Labour in the lead-up to the 2024 election.
Carpetright even blamed Tapi’s aggressive expansion for putting ‘significant pressure on the group’s best-performing sites’ in 2018.
Carpetright had been hoping for a quick sale due to cashflow pressures but there are fears Tapi would not be able to buy it quickly as it would need to go through competition clearance.
Although no formal bids have yet been made, the sale process is likely to be completed through a pre-pack administration, which could result in hundreds of jobs being lost and stores closed.
A sale could involve a buyer stepping in to save all, or just parts of the company.
Meanwhile Carpetright was also targeted by a ‘software attack’ in April which increased financial pressures, The Sun reported.
One insolvency expert described the attack as the ‘straw that broke the camel’s back’.
Hackers targeted the company HQ in Purfleet, Essex, sending malware to gain unauthorised access.
Carpetright’s network was taken offline due to the cyber attack but bosses insisted that the virus was isolated before any data was swiped.
Staff and hundreds of customers were affected by the malicious virus with employees unable to access their payroll information.
A source said at the time: ‘Some staff networks were taken down including the portals that workers use to book time off and look at payslips.
‘It happened abruptly and was worrying because customers couldn’t get through to helplines.
‘Everything at HQ was taken offline as that was the best way to stop the attack spreading to customer data.’
Another problem facing Carpetright is the general economics of the UK.
Rebecca Dacre, partner at Mazars, told CityAM: ‘We are unlikely to see the retail sector trading comfortably until interest rates start to fall.
‘Despite inflationary pressures easing, high interest rates and low consumer spending continue to persist.
‘The rise in the National Living Wage is the largest on record and some face a sharp rise in business rates from April.
‘One of the issues that chains like Carpetright will face is who will want to rent their excess space.’
After Carpetright was founded in 1988, it enjoyed years of success, listing on the London Stock Exchange in June 1993.
It was taken off the stock market in 2019 by its biggest investor, Meditor, which had taken on almost 30 per cent of its shares and more than £40 million of its debts.
Kevin Barrett, CEO of Nestware Holdings, which is owned by Meditor, said: ‘We remain focussed on securing external investment to ensure as few customers and colleagues are impacted as possible.
‘They are our main priority and we are taking all appropriate action to make sure they are informed and supported through this process.
‘We have begun promising conversations with interested parties that are moving in the right direction, encouraging us that Carpetright has a viable future.’