The company, which trades from around 650 stores in Britain, Ireland, Belgium and the Netherlands, said underlying pretax profit would be below market expectations as discounting to help drive sales hits its profit margin.
With sales volatility continuing to impact on the pace of margin improvement, we expect underlying pretax profit for the full year will be slightly below the lower end of the current range of market expectations, chairman and chief executive Philip Harris said.
Harris, whose family own around a quarter of the company, said tough trading conditions had persisted throughout its third quarter with consumer confidence fragile.
Looking forward, I see no respite from the challenging environment over the next 12 months, he said.
Many Britons have been curbing spending as disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures.
Carpetright has been particularly hard hit because of a stagnant housing market and because carpets are a discretionary purchase.
The company has responded by lowering prices, expanding into beds, upgrading its range of laminate flooring and cutting costs. It expects to cut costs this year by 5 million pounds compared with the year before.
Carpetright said sales at British stores open over a year were down 0.5 percent in the 12 weeks to January 21, its fiscal third quarter, compared to a second quarter fall of 3 percent.
Like-for-like sales in the rest of Europe were up 0.3 percent during the period.
Shares in Carpetright, which have lost over a quarter of their value over the past 12 months, were down 8.2 percent to 567 pence at 10:20 a.m., valuing the business at around 380 million pounds.
There will be a lot of disappointment with these figures. The big ticket, housing related markets, continue to struggle with the housing market in its fourth year of weak transaction numbers, said Seymour Pierce analyst Freddie George.
Carpetright said its gross profit margin fell by 430 basis points in the first half. It expects a decline of around 300 basis points in the second half as it continues to cut prices to drive sales growth.
In an interview with Reuters, Finance Director Neil Page said he expected Carpetright's full-year underlying pretax profit to be in the range of 6 million to 8 million pounds, below the 8 million to 12 million pound range which analysts had forecast.
Page said he expected the company to achieve like-for-like sales growth in the fourth quarter as the new bed range boosts sales and the company comes up against weaker comparatives.
We'd hope to do that (achieve growth). We see weak comparatives in the final quarter. There are some positive signs but it's still a tough and challenging market, he said.
Peel Hunt analyst John Stevenson downgraded his pretax profit forecast to 6 million pounds from 11.9 million.
(Editing by Mark Potter)