MFI cuts back after £30m orders blow

MFI customers have cancelled orders worth £30m over the past nine months, and the troubled furniture group warned today that it faces continued supply problems ahead of its crucial Boxing Day sale.

The group is reeling from the botched implementation of a new £50m supply system, which left it unable to fulfil orders. It has already warned its stores chain will make a big loss this year.

Chief executive John Hancock today unveiled cost-cutting measures, including 80 job losses at its Edgware Road head office. Consultancy and advertising spending is also being reined in. Hancock says the moves will save £40m and predicts a 'substantial' improvement in results on the retail side next year.

Gross orders for the year to date are down 3%, but this rises to 8% including refunds for missed and late deliveries. Margins have also been hit by price cuts.

While the worst is over on the supply chain side, Hancock said some disruption is still possible as order volumes peak, and contingency plans have been put in place. The winter sale is crucial for the group, with the 18-day trading period accounting for as much as 20% of annual sales.

Howden Joinery continues to do well, with underlying sales growth of 18% in the second half, though this is expected to slow next year as fewer new stores open.

MFI's pensions deficit is now estimated at £310m, or £217m net of tax, costing it £34m next year.