MFI reshuffles the furniture in move up-market

MFI, the troubled kitchen, bedroom and bathroom retailer, is to make a dramatic move up-market by launching a new kitchen chain and selling its 29-store Sofa Workshop brand as part of a restructuring.

The furniture retailer is also likely to quit the bathroom market completely, after sales slumped by 40 per cent over recent months, and will close up to 20 stores, affecting hundreds of jobs. Over time the retailer will also downsize the larger outlets in its 195-strong MFI chain.

The measures will be announced next Tuesday by Matthew Ingle, MFI’s chief executive, as part of his strategic review of the battered company, which has faced plunging sales across nearly all its divisions.

The retailer is quietly testing the new upmarket kitchen store in a secret warehouse in Doncaster. The concept - believed to be called Dreamworks - will sell kitchens in the £8,000-£12,000 range, far higher than the prices MFI currently offers. The concept will allow MFI to compete head on with Magnet, the Swedish store group owned by Nobia, the kitchen company to which MFI sold its French retail chain last week for £92m.

It is understood that MFI’s board is still deliberating on the move out of bathrooms. It is unclear which stores will be closed but analysts believe that MFI’s chain of 21 Conran-designed town-centre stores could be hardest hit.

A spokeswoman for MFI declined to comment on its plans but said “no final decisions have been made” about the review.

Ingle is battling to turn the chain around in the wake of four profit warnings and the sacking of John Hancock, his predecessor. Last month MFI shares hit a five-year low of 55.5p. They closed on Friday at 84.5p.

The retailer is in the middle of its most extensive sale ever. Its traditional January sale has stretched well into February and ends on Tuesday. The retailer is offering discounts of “up to half price plus 30 per cent off”.

According to an executive close to MFI, sales for the six weeks to early February were £155m, down by 20 per cent from £195m last year. However, sales over the past two weeks have been flat because of the extended promotions.

Last week MFI agreed a new 39-month £150m fully underwritten loan. It has also called a halt to its Howden Millworks store trial in the US.