UPDATE 2-Carpetright sales up, profit to beat forecasts

* Benefits from failing rivals, house market growth

* Expects sales boost from insurers

* Sees "good" H2, sees overall market still falling

* UK/Ireland Q2 like-for-like sales up 5.6 pct

* Shares down 1.1 pct (Adds detail, CEO, analyst comments, shares)

By James Davey

LONDON, Oct 28 (Reuters) - Carpetright (CATVU.L), Britain's biggest floor coverings retailer, grabbed market share from failing rivals and reported a boost from growing housing activity to post a second straight quarter of rising sales.

Chairman and Chief Executive Philip Harris said the overall floor coverings market fell over 20 percent in the last six months but first-half profit would beat current market expectations of 10 million pounds ($16.37 million).

"Although we expect the overall (UK/Ireland) market to be down, we expect to have a good second half," the 51-year veteran of carpet selling told a conference call for analysts on Wednesday.

But he cautioned that in 2010 shoppers might be kept out of showrooms by the British general election, TV coverage of soccer's World Cup and tax hikes for higher earners.

Shares in British retailers have been rallying amid signs the country is close to emerging from recession and stock in Carpetright, which trades from 718 stores in the UK and Ireland, has nearly doubled over the last year, outperforming the FTSE All Share General Retailers Index .FTASX5370 by 20 percent.

British retail sales grew at their fastest pace in almost two years in October and the outlook is expected to improve further in November, industry data showed on Tuesday. [ID:nLR389891]

Carpetright shares were down 1.1 percent at 890.5 pence at 1123 GMT, valuing the business around 590 million pounds, as investors booked profits.

"There is no reason to anticipate a slackening of the pace of growth in the second half," said David Stoddart, analyst at Altium Securities.

Carpetright said sales at stores in the UK and Ireland open more than a year increased 5.6 percent in the 12 weeks to Oct. 24, accelerating from a first-quarter rise of 1.4 percent.

The firm benefited from weak comparative numbers in the same period last year, the collapse of its main rival Allied Carpets earlier this year, increased activity in the UK housing market and a positive contribution from the Sleepright beds business purchased last December.

The underlying margin on the retailer's carpet business remained in line with last year, but a greater proportion of bed sales resulted in a fall of about 60 basis points in its overall UK gross profit percentage.

Harris said new insurance business from Lloyds Banking Group (LLOY.L) and Royal Bank of Scotland (RBS.L), and new business from house builders, such as Redrow (RDW.L), would boost sales in the second half.

He expected analysts' consensus pretax profit forecasts for the year to end-April 2010 to settle in the range of 33-35 million pounds, up from 17.2 million pounds in 2008/09, and forecast year-end net debt of 50-60 million pounds and zero debt by end-April 2011.

Second-quarter like-for-like sales in the Rest of Europe division - the company has 126 stores in The Netherlands, Belgium and Poland - fell 8.2 percent, reflecting slowing economic conditions.

(Editing by David Cowell)