MFI disappoints the City with its poor bedroom furniture sales

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The Independent Online

MFI yesterday blamed a dire end to its key winter sale for plunging like-for-like sales at its core UK retail business.

MFI yesterday blamed a dire end to its key winter sale for plunging like-for-like sales at its core UK retail business.

The furniture group, which just three weeks ago guided the market to expect sales to recover, said its "outdated" bedroom ranges had put customers off buying its products. Its shares plunged 3 per cent to 140p.

John Hancock, the chief executive, said the group had been "running to catch up" during the early weeks of its winter sale. "We would have expected a slightly stronger final three weeks," he admitted.

Like-for-like sales across its UK estate fell by 4 per cent from Boxing Day to 21 March, exacerbating the 3 per cent decline that the group reported last month. David Jeary, at Credit Suisse First Boston, said same-store sales must have fallen by 6 to 7 per cent in March, against the management's hopes that they would be flat against the previous year.

Sales of its bedroom ranges fell by "double digits", reflecting the company's decision to focus on overhauling its store estate rather than the products it sells, Mr Hancock said. "Our range is fairly outdated. We put all our resources into the store refurbishments. But we are a fashion business. New product drives sales," he added.

Although Mr Hancock said kitchen sales, which account for more than half of turnover at its UK retail chain, had been "quite strong", he failed to allay most analysts' fears that the group was suffering from increased competition on the high street. GUS's Argos and Kingfisher's B&Q have both upped their assault on the homeware market, causing some analysts to warn that MFI could be a casualty.

Mr Hancock brushed off such fears. "There is clearly more competition in the furniture area than there was. But it's a vibrant market with good dynamics. We are the largest player and seen by the consumer as the biggest brand."

MFI took a further knock to its credibility yesterday when it was forced to reissue its trading statement after including the wrong figure for its total group orders. It only realised the mistake when an analyst queried the group's maths during a conference call. Group orders rose by 5 per cent to £512m, and not £487m as it initially claimed. "It was an administrative mistake. Someone transposed the wrong number," Mr Hancock said. On a like-for-like basis group orders grew by 3 per cent.

The company's building supplies arm, Howden Joinery, continued its stellar performance, reporting a 20 per cent rise in like-for-like sales during the past 12 weeks. Its French retail business, Hygena Cuisines, also traded well, with same-store sales increasing by 19 per cent.

Analysts at Numis Securities said the growth at Howden, which contributes 60 per cent of group profits, had been overlooked. "The market is far too focused on UK retail, which means there is a fantastic opportunity for those prepared to focus on the real driver of MFI," they said.

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