The retailer awarded the business to Draft FCB without a formal pitch after a review process overseen by Allied Carpets' chief executive, Clive Hutchings.
Draft FCB will create an above-the-line advertising campaign, expected to break in 2007, to promote the retailer's carpets, floor coverings and other household goods. Advertising was previously handled in-house.
Hutchings said: "We were looking for a specific advertising agency to create a campaign for us. Draft FCB came very highly recommended."
Allied Carpets is owned by the French retail giant Tapis-Saint Maclou and has a network of 220 stores in the UK. The retailer had a media spend of £2 million in 2005, according to Nielsen Media Research, but this is expected to increase in 2007.
Carat, Allied's media agency, is unaffected by the creative change.