Furniture retailer MFI disappointed the market yesterday after announcing that January sale bargain hunters were likely to eclipse improvements to its troubled supply chain.
The group, which has around 12 MFI stores in the West Midlands area, said cost- conscious customers placed a larger number of orders below £500 in the period from December 26 to March 2.
MFI, which also trades under the Howdens Joinery and Hygena Cuisines brands and competes with B&Q and Homebase, said orders taken by its UK retail arm increased across all categories, with bedrooms, beds, sofas, living room and office furniture and bathrooms all rising above last year's levels.
Last month, the company blamed teething problems with a new supply chain management system for a sharp fall in 2004 profits.
It said it had fixed the problems and that the supply chain had operated adequately during the winter sale.
However, MFI said yesterday that, in line with expectations, UK retail had been the worst performer of its three main divisions, with like-forlike orders rising just two per cent during the period and four per cent in total.
The group warned that the shift towards budget ranges and higher logistics costs will mean flat profit margins for the current financial year to December.
Chief executive John Hancock said: "We looked at the market last year and pricing, and we invested more in entry-level pricing that we maintained into our winter sale.
"The result of that was we've seen some mix changes, particularly to the lowerpriced items where we probably lost some business during the early part of 2004. So we saw that business coming back into the company."
One result of this is that logistics costs as a proportion of sales will increase on the basis that it costs the same to deliver a cheap kitchen as a more expensive one. Shares closed down 61/4p at 1281/4p.