Furniture retailer MFI will close 11 stores and outsource more manufacturing operations in a move putting nearly 1,500 jobs at risk.
New chief executive Matthew Ingle yesterday announced the changes as the company revealed its trading difficulties forced it into the red in 2005.
The £600,000 deficit was not as grim as analysts expected, but still compares with 2004 profits of £54 million.
MFI's retail business made a n operating loss of £85.1 million - 171 per cent worse than last year - on sales down 4.5 per cent to £787.8 million.
The company will embark on a shift in focus by selling more upmarket kitchens and bedrooms and cutting back on areas such as home furnishing.
Shares in the group rose seven per cent, even though Evolution Securities analyst Nick Bubb described the proposed measures as "pretty feeble" and "not enough to make a real difference".
He believes 100 stores might close.
Christian Koeford-Nielsen, analyst at Panmure Gordon, believes more store closures are "inevitable".
He added: "This is not a cyclical recovery story. It is a structurally compromised retailer that is expected to struggle as new capacity continues to encroach on its core business."
MFI said around 930 jobs could go with the proposed closure of its Stockton-on-Tees and Scunthorpe factories.
Another 128 are threatened at its Howden UK joinery business near Hull as MFI aims to source 75 per cent of products from abroad by the end of 2006 - saving £12 million a year.
Its focus on more profitable kitchen and bedroom markets would see it cut ranges, pulling out from home furniture means the sale of its Sofa Workshop chain - where 95 jobs could go.
It will also shut at least 11 of its 215 stores, costing another 95 jobs, while a further 180 jobs are threatened by the proposed closure of regional home delivery centres, at Aldershot, Glasgow and Nottingham.
Transport & General Workers' Union regional organiser Ian Wood said: "We are very disappointed market conditions have led to people losing their livelihoods. Job losses on this scale are a bitter blow to communities."
MFI's decision to keep some UK manufacturing was "a glimmer of light in the gloom", he added.
Usdaw pledged to support members at MFI, saying workers would be very worried.
National officer John Gorle said: "It's always difficult for a union to represent members without a formal agreement but our MFI members are amongst our very best activists. They have been telling us for some time about the problems of poor service levels, which the company has acknowledged, but they shouldn't lose their jobs because of it.
"We welcome MFI's commitment to become more focused on customer delivery but wholesale redundancies of highly motivated and experienced staff will not help them compete in an extremely competitive and difficult sector.
"We'll be contacting senior MFI management to find out which stores are earmarked for closure and where they will shed jobs, because the sooner information is passed down to the workers, the less worry and uncertainty there is for our members." ..SUPL: