Sofa retailer Land of Leather, which has outlets across the Midlands, has reported a marginal decline in its first-half pretax profit due to a 16 per cent fall in its like for like sales and a four per cent decrease in its total sales order intake.
The company posted a pretax profit of £5.5 million for the 26 weeks to January 27, 2008, from £5.8 million a year earlier. Before exceptionals, the previous year's figure was £8.43 million.
Revenues rose to £133.3 million from £115.79 million.
However, it has said the next six to 12 months are likely to be difficult as demand for "big ticket" items such as suites declines due to the continuing credit squeeze.
The company has reduced its advertising budget and frozen its store expansion plan, a major victim of which has been its outlet in Birmingham. Previously based in the Five Ways Shopping Centre, it has been demolished as part of a redevelopment.
The company said it had no plans to open a replacement for at least 12 months while the harsh trading conditions persisted.
Elsewhere in the area, the company has stores in Wednesbury, Coventry, Telford, Worcester, Solihull, Stoke on Trent, Droitwich and Cannock - the later bought out of administration last summer from previous owner Klaussner.
Land of Leather said profitability in the second half would be affected by a poorer performance in the January sales with like for like order intake for the 34 weeks in the year to date down 18 per cent.
Nevertheless, it said it still expects to remain marginally profitable in the second half due to the planned cost reductions.
The company said it has a strong balance sheet and cash to trade through the challenging times.
It also announced that its founder, chief executive Paul Briant, would be succeeded by Steve Jenkins, following his retirement on August 3.
The company said it had suspended payment of its interim dividend due to the unpredictability of recent trading levels and added that it has put its share buyback programme on hold.
Chairman Roger Matthews said: "Like other participants in the sector, we have been impacted by the significant downturn in demand for big ticket household goods.
"However, we are now well placed to trade through these challenging times given our strong balance sheet, net cash position and differentiated retail proposition.
"As a result, we are now very strongly placed to increase profits quickly when consumer confidence returns."
In reaction, Investec noted that the outlook is clouded by limited visibility on the consumer outlook and a number of other factors.
These include a further deterioration in the cumulative like-for-like order intake, management changes, cancellation of dividend and buybacks, and its major concession, Sleep Depot, under-taking a financial restructuring.
On the basis of this, the broker said it had reduced its estimated pretax profit figures for 2007/08 and 2008/09 to £5.5 million from £7 million.