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Struggling furniture retailers ScS Upholstery and Land of Leather have both said they are looking to raise new capital as part of moves to reassure investors.

The firms have seen their sales and share prices slump as the credit crunch and housing market slowdown have taken their toll on sales of “big ticket” items such as sofas.

Sunderland-based ScS said discussions were taking place with “a number of external parties to raise additional working capital”.

Kent-based Land of Leather said it was finalising the issue of new shares, details of which will be announced later this week.
The announcement from ScS came after the firm revealed last week that an insurer refused to cover five suppliers against ScS being unable to pay them. It also followed a report at the weekend that an administrator had been lined up in case a restructuring of the business fell through.
ScS said: “The unexpected and sudden withdrawal of credit insurance from the market, which has impacted us and other retailers, has placed a strain on the working capital needs of our suppliers. We continue to trade with all our suppliers with whom we have a symbiotic relationship and we are working to address their working capital requirements.”

ScS is worth a fraction of its stock market value a year ago. The group trades from around 95 stores and has 1,500 staff.
In May it warned of an annual loss after worse-than-expected trading over the crucial bank holiday weekend at the beginning of the month. The major trading period for furniture stores was “particularly disappointing” as like-for-like sales orders plunged by a fifth compared to the previous year.

Analysts who previously hoped for a break-even performance are now braced for a loss of around £1.6 million for the year to July. Shares in the firm dipped nearly five per cent.

Land of Leather, which said last month that like-for-like sales had slumped by nearly a third at its 108 sites, said it had received indications of support for its fund-raising move from shareholders, including its directors who together hold more than 50 per cent of the share capital.
But it warned: “While Land of Leather expects that it will be able to complete such a fund-raising there can be no certainty that any such fund-raising will be announced.”