Sofa Workshop in last-ditch talks as high street suffers

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The Independent Online

Sofa Workshop, the 31-store furniture retailer, is on the brink of administration, capping another bad day for the retail sector yesterday after a profits warning from the quirky fashion chain Ted Baker.

Paul Staden, marketing director of Sofa Workshop, said that it had filed a notice of intention to appoint an administrator "as a protective measure while discussions continue to refinance the business". It has lined up Leonard Curtis, the recovery specialist, as administrator if rescue talks fail.

If Sofa Workshop does fold, it will become the 11th retailer to collapse into administration since 21 December. This week, Viyella, the 107-store and concession womenswear retailer, also appointed administrators, following in the footsteps of The Officers Club, Zavvi, Adams and Whittard of Chelsea over recent weeks.

Another collapsed retailer, New Heights, bought Sofa Workshop from MFI for £1.8m in October 2006.New Heights fell into administration in May last year, while the furniturechain MFI also hit the buffers in late 2008.

In the year to 31 May 2008, Sofa Workshop delivered a £2.7m pre-tax loss, after posting a loss of £3.3m in the 17 months to 31 May 2007.

Zavvi, the entertainment chain which is also in administration, said yesterday that it had closed 22 stores with immediate effect, making 178 staff redundant. The administrator, Ernst & Young, said it will continue to trade Zavvi's remaining 92 stores.

Meanwhile, QS, the 220-store discount fashion retailer owned by the Indian company Grabal Alok, vehemently dismissed speculation it was heading for a financial crunch. Anupam Jhun Jhun Wala, chief executive of QS, said that one of its suppliers had "threatened a winding up order" in December, but the retailer had "immediately" paid the supplier on the same day.

Mr Wala said that QS, which has changed some of its fascias to Store 21, had "broken even" in the last quarter of 2008, which represented a £5m improvement in pre-tax profits on the previous year. He said QS's like-for-like sales in December had been in "positive" territory.

Ted Baker said its full-year pre-tax profits would be at the "lower end of the range of market expectations, which currently stands at £19m to £23m". The fashion retailer posted a 7.2 per cent increase in retail sales for the period between 1 November and 24 December. But it said that gross margins were 2.5 per cent lower than for the same period last year, as a result of heavier promotional activity.

Elsewhere, House of Fraser, the department store which is backed by a consortium led by Baugur, posted a 1.5 per cent fall in like-for-like sales for the five weeks to 3 January. Total sales grew by 4.5 per cent. House of Fraser said it continues to repay its banking facilities ahead of schedule and repaid £34.5m on 2 January.

Discounters continued to buck the gloom. The 526-store value fashion chain Peacocks registered a 1 per cent uplift in underlying sales for the 14 weeks to 3 January and said it had secured a further £20m from shareholders to fund its expansion.

US retail chill: Even Wal-Mart disappoints

The mighty Wal-Mart, the US discounter which has proved a bolt-hole for cash-strapped consumers throughout the economic downturn, yesterday issued a profits warning, capping a grim day for Americanretailers.

The alert from the world's largest retailer came amid a dismal slew of announcements from US chain stores, reflecting how miserable weather compounded the economic gloom and made it the worst holiday shopping season in at least four decades.

Like-for-like sales at US retailers fell 1.7 per cent in December from the same month in 2007, the International Council of Shopping Centres said,totting up the day's stock exchange announcements.

Wal-Mart's sales, excluding petrol, rose 1.7 per cent, worse than Wall Street's expectation of a 2.8 per cent increase, and the company said fourth-quarter profit would now miss Wall Street's forecasts.

Among the disappointing news,the clothing retailer Gap's sales were down 14 per cent. Abercrombie & Fitch shares plunged 8 per cent in morning trading. J Crew said it will post a loss, not the previouslyexpected profit. The department store chain Macy's is closing 11 stores.