MFI vulnerable to bid or buyout

TAKEOVER speculation at MFI is set to reach fever pitch after the furniture retailer today revealed an alarming fall in sales and a 45% slump in profits.

Chief executive John Hancock conceded the group had suffered from a litany of mistakes and would have to be far more aggressive on price to win back customers

Like-for-like sales in the core MFI chain plunged 12.7% in the 24 weeks to 12 June, taking sales across the group down 0.7%. Pre-tax profits fell to £32.1m from £59.3m a year ago. Only Howden Joinery, MFI's fast-growing supplier to the trade market, saved the group from an even worse showing. Sales in the division rose nearly 26% to £227m.

MFI now plans a marketing blitz to highlight favourable price comparisons with rivals such as B&Q. New products will make up 25% of a store's range.

Hancock said: 'We are not pleased with the performance. It's not what we hoped for and we were expecting a better result.'

Hancock refused to comment on rumours that he has been considering a buyout of between 180p and 220p a share or that private equity buyers such as Permira are lining up bids.

MFI's shares recently hit a year low of 130 3/4p. They rose 3 3/4p to 137 1/2p today.

A glimmer of light for investors came in an update on trading in the past five weeks where like-for-like sales in the main MFI chain were down just 1%. They added there was not yet a takeover premium in the shares.

Shareholders will receive an interim dividend of 2p, up 11%.