British furniture retailer Land of Leather reported an 87 per cent drop in annual profit this morning, falling foul of an economic downturn and weakening consumer confidence, and said 2009 would be challenging.
The struggling sofa chain reported pretax profit for the year to August 3rd of $2.3 million ($4.01 million) compared with £18.5 million last year, while total sales fell 3 per cent to £232 million. The group's gross profit margin fell 2.5 percentage points to 42.1 per cent.
The retailer, which has issued three profit warnings since Christmas, said the remainder of this year and next year would be difficult, especially due to its low opening order book and tough sales comparatives.
"It has been a very difficult year, and we expect, and are planning for, the challenging market conditions to remain throughout 2008 and 2009," Chairman Roger Matthews said in a statement.
Furniture retailers are having a torrid time as consumers stop spending on expensive items such as sofas in order to cope with rising food, fuel and mortgage costs. Earlier this year rival ScS Upholstery went into administration.
Analysts' average forecast for pretax profit for the year to the end of July was £2 million, according to Reuters Estimates.
Earlier this year Land of Leather was forced to make a share sale underwritten by Investec and struggling Icelandic bank Kaupthing to raise £15 million to keep trading.
Kaupthing this week received a $680 million loan from the Icelandic central bank to keep its head above water as the country's banking system required emergency measures to prevent a collapse.
However, Land of Leather, which also raised £3 million through other institutions and management, told Reuters it "has not been affected by the Iceland situation."
The retailer said total sales orders were down 28.9 per cent on a like-for-like basis, stripping out the contribution from new space opened in the year.
Reuters