The boss of MFI paid the price for a dramatic trading slump after the furniture store chain announced another sharp deterioration in sales.
MFI said net orders were 31 per cent lower than a year earlier over the last month, with the company now expecting a small loss for its financial year.
Chief executive John Hancock will leave the company with immediate effect and is to be replaced by Matthew Ingle, who is managing director of MFI's Howden Joinery business.
The 31 per cent decline in sales for the core UK retail division compares with a fall of 15 per cent seen in the previous 13 weeks.
With trading conditions unlikely to pick up soon, MFI said it had been in discussions with the group's lenders about future arrangements. However, it stressed that it had not breached any banking covenant.
"These discussions are constructive and the board expects good progress to be made," the company said.
Mr Ingle, who joined MFI in 1995 and has led the development of the Howden Joinery business, said he was "urgently reviewing" the strategy of the group, adding that he was determined to improve the performance.
He said: "This is fundamentally a good business. My immediate concern is to maintain the strong momentum of Howden and improve the performance of UK retail."
Mr Hancock became chief executive in March 1999, having served as a non-executive director for three months prior to that. He was previously an executive director of WH Smith and his career has also included senior posts with Associated British Foods and Ted Bates Advertising.
The group is one of a number of retailers to suffer from consumers' reluctance to splash out on big-ticket items. Others to feel the downturn in recent months have included B&Q and Comet.
But MFI has been under additional pressure following last year's revamp of its supply chain, which replaced a system that was 20 years old and could no longer support the growth of Howden Joinery or the expansion of the group overseas.
Howden has helped offset the trading woes at MFI as its profits under Mr Ingle's leadership have risen from £ 9 million in 1999 to £100 million in 2004. MFI said yesterday that Howden and its Hygena Cuisines business in France continued to perform well and in line with expectations.
Chairman Ian Peacock said Mr Ingle had a successful track record and strong operational skills.
He added: "Matthew has over 20 years' experience selling kitchens and understands the issues faced by the group."
Richard Ratner, from Seymour Pierce stockbrokers, said he was now looking for full-year losses of £7 million, against a previous forecast for profits of £40 million.
He also ruled out a final dividend payment for this year and cut next year's expectations to 2p a share.
Mr Ratner added: "We do not see either an offer or a break-up for the group, because of the pension deficit and the difficulty of splitting the manufacturing."