Carpetright today further underscored growing caution among British consumers when it reported a fall in underlying first-half sales and warned that the second half of its financial year would be "challenging".

The UK's largest carpets and floor coverings retailer, currently at the centre of an £850 million bid from its chairman and chief executive Lord Harris of Peckham, said particularly weak trading in October had sent same-store sales down by 3.4 per cent during the first half.

The group, which operates out of 658 UK stores, said that market conditions in the UK were responsible for an increase in pre-tax profits of just 1.4 per cent to £28.1 million for the six months to the end of October.

Carpetright, which bought 30 Storeys outlets at the start of May, said that the first weeks of its second half had started strongly but that it expected trading in the period would be under pressure.

Lord Harris blamed the crisis at Northern Rock, the stricken mortgage bank, for the tail-off in demand. "People were taking their money out; they were concerned about what was happening," he said.

Lord Harris said that he expected last month's cut in interest rates to help to revive confidence among shoppers, but he said that the soaring price of fuel, a component in the yarn that goes into carpets, would continue to drive prices higher.

Ironically, Lord Harris said that a mild confidence downturn tended to be good for Carpetright's business.

"I don't think it's a question of having confidence," he said. "Their fuel bills have gone up dramatically; people have less money to spend when it's a downturn and they don't go on expensive holidays. Our average spend is £100 on a bedroom and £350 on a lounge or a landing. That's not a dramatic amount."

Underlying profits increased by 4.6 per cent to £27.2 million. The company is the latest in the growing line of retailers to highlight a slowdown in consumers making "big ticket" purchases.

Recently, both DSG, owner of Currys, and Kesa, which operates the Comet chain, said that sales of white goods such as fridges, freezers and washing machines had been more subdued indicating that people are putting off buying large expensive goods.

Retailers have reported a downturn in consumer sentiment after five successive interest rate rises by the Bank of England since last August.

Clapham House, the owner of Tootsies, sparked a sell-off last week when it warned of a profits shortfall. Restaurateurs have begun to caution about harder business conditions.

Today, Whitbread said that overall sales rose 15 per cent but this was driven by its Premier Inn hotel group and its Costa coffee shops. In contrast, its restaurant group saw like-for-like sales rise by just 0.4 per cent and by 1.5 per cent in total.

Lord Harris has been examining the books at Carpetright since early October after his consortium tabled a £12.50 a share bid. He said today that his consortium was at the advanced stages of its bid plans, adding: "We will not be changing our mind on price."

There had been reports that Harris Associates, the American shareholder that holds 8.5 per cent of Carpetright, was seeking a higher offer, but conditions have deteriorated since then.

Harris, Carpetright's third-largest holder, is unconnected to Lord Harris.

Shares gained 38p to £10.53 in early trading.

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