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Last Updated: Tuesday, 28 February 2006, 17:21 GMT
MFI revamp threatens 1,500 jobs
MFI sign
MFI is set to shut 11 stores
Furniture group MFI has unveiled a major restructuring plan aimed at reviving its fortunes which could see up to 1,500 jobs being shed.

The firm is closing 11 stores, cutting back on manufacturing and reducing the range of goods it sells to focus on fewer, more expensive products.

MFI said that its UK retail side had recorded an operating loss of 85.1m in 2005, against a loss of 31.3m in 2004.

Chief executive Matthew Ingle said 2005 had been a "difficult year".

Cutbacks

MFI said that about half of the goods sold in its stores were currently made in-house.

A much more focussed and flexible structure is required to improve performance
MFI statement

However, in order to cut costs, it said it would be cutting its UK manufacturing capacity by about 40%, which could lead to about 1,100 job losses. The firm said this should produce annual savings of about 12m.

On the retailing side, MFI said it planned a major shake-up of its operations.

"Retail suffers from poor customer service levels, both in-store and with delivery," the company said. "A much more focused and flexible structure is required to improve performance."

MFI said it would cut back the range of products it offered to concentrate on kitchens and bedrooms, which account for more than 80% of sales in its stores.

It also said it would concentrate on selling a smaller selection of higher quality kitchen and bedroom ranges in order to lift profit margins.

The changes mean that MFI now plans to sell its Sofa Workshop business. The firm also said it had identified 11 stores for closure, and in addition it is planning to shut three delivery centres.

The reforms are set to cut 370 jobs from MFI's retail operations.

Union disappointment

About 930 of the jobs at risk are at the Stockton-on-Tees and Scunthorpe factories which have been earmarked for closure.

"There's no doubt job losses on this scale are a bitter blow to the local communities," said Ian Wood, T&G regional industrial organiser.

"The T&G was informed this morning of the company's decision and we are very disappointed that market conditions have led to people losing their livelihoods."

Higher margins

Shares in MFI were up 3% at close of trade, as investors focused on better-than-expected news on current trading.

In the first few weeks of the year, like-for-like sales at MFI's stores - which strip out the impact of store openings and closures - were down 14% on the same period in 2005.

However, profit margins were up by five percentage points and as a result, like-for-like gross profit was only down by 5%.

At MFI's profitable Howden joinery business, like-for-like sales were up 6%, with margins up by one percentage point.

The Howden business - which MFI is seeking to expand at the rate of 30 new stores a year - reported an operating profit of 103.6m for 2005, up from 102.8m in 2004.

The MFI group as a whole reported a pre-tax pre-exceptional loss of 600,000 for 2005, down from a profit of 54.5m in 2004.

However, after a taking into account exceptional items - which included a number of asset writedowns - pre-tax losses were 110.8m, down from a profit of 20.6m in 2004.




SEE ALSO:
MFI sells French kitchen business
14 Feb 06 |  Business
Declining sales continue at MFI
01 Dec 05 |  Business
MFI head steps down as sales dive
03 Oct 05 |  Business
MFI hit by sharp fall in UK sales
08 Sep 05 |  Business
MFI tackles supply chain problems
16 Nov 04 |  Business
MFI shares rally on bid rumours
04 Nov 04 |  Business


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