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UK retailer Headlam shares drop on lower 2019 pretax profit view

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(Reuters) – British floor coverings distributor Headlam Group <HEAD.L> warned on Wednesday that its underlying pretax profit in 2019 would decline because of a weaker residential market and higher costs, sending its shares down as much as 10 percent.

The company specifically pegged higher distribution costs and administrative expenses in a sluggish housing market.

“Costs are running higher than we expected and cost reduction initiatives slower than we had thought,” Peel Hunt analysts said in a note, trimming its price target by 60 pence to 400 pence.

Headlam shares were most recently down 6.60 percent at 373.60 pence, their lowest levels in more than five years.

Headlam Group’s announcement follows difficulties for fellow flooring sector retailer Carpetright Plc <CPRC.L>, which recently reported steep losses after being hit by weak demand and store closures.

“It is currently anticipated that the UK market will show further general weakness during 2019, particularly in the residential sector where the company’s distribution business is more heavily weighted,” Headlam said in a statement.

The company, which distributes floor coverings in the UK and Europe, also said it would stockpile in case of any potential problems with deliveries following Britain’s proposed exit from the European Union.

Headlam originally listed on the London Stock Exchange as Headlam, Sims & Coggins Plc in 1948.

(Reporting by Karina Dsouza in Bengaluru; Editing by Bernard Orr)

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