This chilly summer has clearly brought out the nesting instinct in British shoppers. Despite many predictions of a grim time for home furnishings retailers, who are usually among the first to suffer when consumers tighten their belts, Carpetright, Land of Leather and ScS have all demonstrated that home improvement is still very much on shoppers’ minds.

Yesterday Carpetright revealed a healthy 2.4 per cent rise in like-for-like sales, which strip out the impact of new store openings, at its British and Irish stores in the 13 weeks to July 28. That sales performance was underpinned by an impressive 1 per cent-plus rise in gross margin as the retailer secured better terms from suppliers and cut back on the need to discount as it installed new IT systems.

Trading at the firm’s stores in Belgium and the Netherlands, which have suffered similar weather patterns to the UK, was even more upbeat, with like-for-like sales rising by 13.4 per cent.

Prospects for holding on to that gross margin improvement look good, given that the new IT systems began to be installed only in May and the full impact on stock control is unlikely to be felt until the end of the year.

Carpetright has also proved itself adept at trimming costs in difficult times and is still in the process of downsizing stores to offset rental and rates increases.

Continuing expansion in Europe, particularly in the new Polish market, where Carpetright has just seven stores, also looks good. However, management is cautious about the outlook for trading in the UK – and understandably so. While the flooding is likely to lead to many hundreds of unfortunate households in affected parts of the country having to replace lost carpets with the benefit of insurance money, it is not clear how positive that will be for Carpetright.

Meanwhile, this summer’s strong figures were partly boosted by being set against a particularly weak sales period a year before, when like-for-like sales slid 0.3 per cent.

From here on, Carpetright will have tougher comparative numbers to beat while the wider market conditions are likely to get tougher. Five interest-rate rises in the past year and the expectation of a further quarter-point rise before Christmas will also increasingly have an impact on consumers’ spending.

Certainly, Lord Harris of Peckham, Carpetright’s founder, does not seem to be rushing ahead with his plan to make a bid for the 76.6 per cent of the company that he does not already own. Yesterday rumours circled that his plans might be ruined by the squeeze on credit availability for private equity-style bids.

However, Lord Harris is understood to have confirmed backing from HBOS, which has a tradition of supporting retail entrepreneurs, and to be in talks with Carpetright’s 14.9 per cent shareholder Olayan, the Saudi investment house, to back the bid.

A more likely dampener on the bid is the share price. Lord Harris is thought to be unwilling to pay more than £13.00 a share for the company, and the shares now stand at £11.23.

The stock is already priced at around 18 times prospective 2007 earnings and 17 times expectations for 2008, a chunky premium on its household sector peers, which average at 14 times earnings. Speculators may consider buying as the stock loiters below £12.00 on hopes of a bid. The sensible will nestle in until Lord Harris plays his hand. Hold

Dairy producers

Will the outbreak of foot-and-mouth disease in Surrey prove to be the last straw for nervous investors in the food production sector?

We should all be thankful that, so far, only a relatively small area of the country has been affected and that this is not a big milk-producing area, but national measures put in place – the bans on livestock movement and milk exports – affect farming and food production across the UK.

The big dairy companies – Arla, Dairy Crest and Robert Wiseman – remain sanguine about the effects of the restrictions. The ban on livestock movements has little impact, except in the very long term if it restricts farmers from boosting their herds with new animals. Milk lorries can still roll in and out of farms with relative ease.

Milk exports also do not count for very much of dairy producers’ business. Milk-related products, such as cream, do. Yet exports can continue to Europe if the dairies impose extra controls, which they say they have at their disposal, anyway.

So it should be business as usual. Well, not quite. The recent downpours that caused such devastation have had an impact on the quality and cost of dairy feed. How much of an impact is not yet clear. Hold.

YouGov

YouGov, the market research group, has certainly won the polls with investors since floating two years ago. The stock has increased more than fivefold in value since the launch as the company has entered the Middle East and cashed in on the trend towards market research over the internet.

Yet the vision of Nadhim Zahawi, the co-founder and chief executive, does not stop there. Yesterday he launched an ambitous £27 million share placement, equivalent to nearly a third of YouGov’s market value, to fund three acquisitions. The group wants to acquire Polimetrix, of the United States, and Zapera, based in Scandinavia, in addition to its planned buyout of the German company Psychonomics. The acquisitions would allow YouGov to compete in an increasingly global market, but they are a lot for a small company to take on at once. International expansion is fraught with difficulties.

It is comforting that YouGov already owns 32 per cent of Polimetrix, which has been a partner for some time, and it has also worked with Zapera and Psychonomics in the past. The placing was happily taken up by a mix of existing and new investors. But, with the shares now priced at 28.4 times anticipated 2007 earnings, they are not cheap. It could be time to take some profits.

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