Second MFI administration is latest blow for home sector

MFI was put into administration, with MCR as administrator, on Wednesday for the second time in two months. The very poor market, the withdrawal of credit insurance and the failure of key suppliers were cited as major issues in the collapse.

26 stores have closed. MFI said former parent company Galiform – which acts as a guarantor for the rent on those stores – requested the closures, but Galiform denied that was the case.

One senior executive at a furniture retailer said: “In the short term it’s awful for the industry, as it knocks consumer confidence.”

Another chief executive of a big-ticket homewares retailer said: “Nobody wants a well established brand like MFI to disappear. It will make people more cautious about how they spend their money in the run-up to the key trading period.”

Land of Leather chief financial officer Clive Hatchard said: “It’s never good news when a retailer goes out of business. There will be an awful lot of people out there without jobs in the run-up to Christmas.”

But retailers denied they would have to reassure customers that their money would be safe with them. “Consumers will be cautious with less known brands but the majority of consumers will assume their money is protected,” said one chief executive of a big-ticket retailer. “Well known household names will be in a safe position.”

Hatchard said consumers are aware of the legislation in place to protect them in such instances and would therefore not worry about purchasing, but he did not rule out the possibility of retailers having to reassure their customers if confidence fell much further. “If your customers are worried then you’d have to give them some comfort. It’s important people know you’re in a good position,” he said.

Rival retailers said the demise of MFI leaves them with opportunities to pick up market share. “In the medium term it’s good for us, as it’s taking competition out of the market,” said one retailer. Another called it a “fantastic opportunity” to build market share and protect sales.
MFI operates more than 100 stores, averaging between 20,000 sq ft and 30,000 sq ft, and there are fears landlords could be left with a large number of voids that they will struggle to fill.

Hatchard said: “There will be lots of empty sites and the vast majority will stay empty for a long time.”
The company had asked landlords for a rent holiday when MFI placed its property arm into administration in September and chief executive Gary Favell acquired about half the stores in a management buy-out, in what he claimed was a rescue of the business.
However, many landlords did not accept the proposal. It is thought that the retailer had not been paying suppliers for some time.

Home improvement: the casualty list
The home improvement sector has been hit hardest since the credit crunch began.

Danish furniture retailer Ilva went bust in June, while Floors-2-Go fell into administration in July, later being bought out by its founders.
Sofa retailer ScS collapsed in the same month and was then bought out by private equity firm Sun European Partners. Beds Direct also went into administration in July but was saved in a management buy-out and renamed Helibeds.

Rosebys hit the buffers in September, while earlier in the year Land of Leather had to refinance, raising£15 million.
Other homewares retailers to have collapsed this year include New Heights, Au Naturale and Fabric Warehouse.