Sluggish sales hit MFI shares

Will a rate rise hit sales?

Furniture group MFI has seen its shares tumble 13% after it issued a disappointing trading update.

The company said underlying sales at its core UK stores had been flat since June, compared with growth of 5.1% in the first half of the year.

The sluggish sales were partly put down to the hot summer weather.

Analysts also fear sales could suffer from the expected rise in UK interest rates on Thursday.

"The UK retail sales performance highlights how difficult the household goods market is at present, and we can only see this heading south," said Richard Ratner, analyst at Seymour Pierce.

"With a consumer squeeze on big ticket items and a rate rise anticipated for this month and more next year, we believe that trade may get quite sticky," he added.

Rate impact 'overplayed'

MFI shares closed down 22 pence, or 13.2%, at 144.5p.

But the company's chief executive, John Hancock, said he was not too worried about the impact of higher interest rates.

"The consumer is still in business," he said.

"I don't think a quarter- or half-point (rise) is going to seriously undermine the positive nature of those rates.

"There will of course be knee-jerk reactions with any move upwards but I think that could be overplayed."

There was better news for MFI from its Howden Joinery trade chain, which saw sales grow 28% in the second half of the year.

And in France, its Hygena Cuisines kitchen business managed to post a 7% rise in underlying sales.