MFI expects to meet full-year forecasts despite slowing sales growth

MFI Furniture, Britain's biggest furniture retailer, yesterday warned it expected sales growth to slow from a strong first half, but said it would still meet analysts' forecasts for the full year.

The company, which sells ready-to-assemble furniture for kitchens, bedrooms and home offices from more than 300 stores in the UK and France, said like-for-like sales growth would probably fall to single digits in its second half, from 12 per cent in the first, as higher interest rates dampened consumer spending.

But it added that refurbished stores – not included in the like-for-like numbers – were giving a bigger-than-expected boost to sales.

"So even if there is a softening of the market, the prospects still look good," Matthew McEachran, a retail analyst at Investec, said.

MFI's shares rose 3.25p to 115.75p yesterday. A loss-making business with high debts in 1999, MFI has benefited from Britain's long-running housing boom. But it has also made internal improvements, bringing in the design guru Sir Terence Conran to update its stores and introducing new products such as bathrooms and sofas as part of its "every room in the home" strategy.

Profits before tax rose to £46.2m in the 24 weeks to 15 June. Analysts' forecasts had ranged from £45.5m to £46.5m.

Mr McEachran kept his full-year profit forecast at £80m, as well as his "buy" rating on MFI shares. But Ian Mcdougall, a retail analyst at Williams de Broe, sounded a note of caution. "Big-ticket" purchases like kitchen refits were the first to suffer when consumer spending slowed, he said, and noted MFI's shares were already highly rated.

The shares have risen from 25p in 1999 to as high as 176p this year, and have outperformed the UK retail sector by 22 per cent over the past 12 months.

MFI, which has about 30 per cent of the UK's kitchen and bedrooms market, said sales were about 40 per cent higher at the 39 UK retail outlets it refurbished during its first half.

As a result, it raised its forecast for sales uplift from its full refurbishment programme to 25 per cent from 15 per cent.

John Hancock, the chief executive, said MFI would refit another 39 UK stores in its second half, followed by a further 80 in its next financial year.