Essex appointed Arthur Andersen as administrators, citing a severe cashflow shortage. Its 34 stores will re-open this weekend in a bid to sell off stock at reduced prices.
Shares in Essex were suspended on Thursday as the company caved in to relentless pressure in the furniture sector. Analysts predict other furniture companies will follow.
Essex warned in July that margins were falling and costs rising. It registered a loss of pounds 3.7m in the first half of the year and said it would close its Southend factory, moving production to its Dudley plant. The costs of an aggressive expansion plan have eroded the company's cashflow just as demand for furniture has weakened. Ted Fisher, finance director, resigned as the profits warning went out.
The closure is a devastating blow to Michael and Martin Franks, the chairman and chief executive of Essex Furniture who founded the company in the 1970s.
The two brothers floated the company in 1989, retaining a 50 per cent stake between them. At its peak in1994, their share of the business was worth over pounds 15m. It is now worth less than pounds 1m.
Other furniture companies such as MFI and DFS have also been hit by dwindling consumer confidence.
Clive Vaughan of Verdict, the leading retail analyst, said: "If consumer demand does stay down then other companies will face the same pressures. There are simply not enough people going into the stores and buying furniture. I don't doubt that other companies will follow."
Analysts say margins have also been squeezed over the past year by higher interest rates. Retailers such as Essex and DFS offer interest-free finance to attract customers. As rates have risen, this has become more expensive to provide, putting upward pressure on prices.
The fall in consumer confidence and a slowdown in the house market have also taken their toll.Reuse content