Shares in ScS Upholstery crashed nearly 28 per cent yesterday after the company issued its second profit warning in two months and its third since going into a closed period in August.
The furniture retailer blamed a fall in profit margins, which would leave pre-tax profits at £8m for the year ended September, below the £10m analysts had expected.
The group has asked its auditor, Ernst & Young, to investigate. It hoped to present a full explanation next Wednesday, when the company is due to post its figures. The shares fell 64.5p to 169p, a year low.
Analysts said modern supply chain technology should enable ScS to monitormargins on a weekly basis.
Numis Securities, the broker, urged investors to reduce their holdings. Commenting on the margin shortfall, Iain McDonald, retail analyst at Numis, said: "Given that ScS books a sale upon delivery of a product, it is difficult to see how such a shortfall can occur." Pre-tax profits last time were £9.8m.
In an effort to boost confidence, ScS said Mike Browne, its chairman and one of the group's original founders, would take a full-time role for the immediate future. David Knight's position as chief executive is not affected.
ScS said it continued to have a strong balance sheet, with cash of £4.2m, and told shareholders to expect a full-year dividend of 10p a share, in line with the payout last year.