Sterling Furniture Group also highlighted the fact that the plunge in the pound has caused additional problems by pushing up the costs of imported stock at a time when it may be difficult for retailers to pass cost increases on to consumers.
However, directors of the Tillicoultry-based firm believe the firm is in good shape to meet whatever challenges lie ahead. It remained firmly in the black during the worst of the downturn.
Writing in accounts for Sterling Furniture Group for the year to April, recently filed at Companies House, directors gave a sober assessment of the outlook for firms selling furniture and other goods for the home.
In surveys completed for the likes of Scottish Retail Consortium, these appeared to be hit hardest by the downturn in the housing market and the recession, which
followed the credit crunch.
The UK’s descent into recession left some consumers reluctant to commit to spending on relatively costly items. The boom in spending before the credit crunch had relied heavily on consumers being able to access relatively cheap credit, which subsequently dried up.
Owned by the family of founder George Knowles, Sterling achieved a national profile through the long-running television advertisements starring sports presenter Dougie Donnelly.
The firm might expect the eight Sterling stores which it operates to have benefited from the recent upturn in the housing market from the lows reached in March. Consumers in Scotland have been increasing spending much faster than south of the border.
However, comments by directors in Sterling’s accounts for the year to April indicate there has been no let- up in the tough conditions which prevailed in the year, during which pre-tax profits fell by 58% to £1.1m.
Turnover increased to £49m from £46m in the preceding year helped by the acquisition of a rival, which owned the Vogue House Furnishers retail operation, in February 2008.
“The retail sector was very difficult throughout last year particularly in the homewares market. A combination of the credit crunch, instability in the financial markets, collapse of the housing market and low consumer confidence placed pressure on retail sales and margins,” wrote directors.
“In addition, the collapse of the pound adversely affected the cost of imports.
“Overall, as for all companies, in our sector the market remains tough and there continues to be risks from many of the factors mentioned.”
However, led by managing director Gordon Mearns, the company responded with what directors described as “strong marketing activity and aggressive cost control”.
These helped the company increase profit margins by 1%, an achievement that other furniture retailers might envy.
Extensive business and operational reviews have been completed over the past 12 months, which directors believe have left the company better positioned to handle the challenges it is facing.
This appears to have involved some sacrifice for shareholders, who went without a dividend in the latest year. The total boardroom paybill reduced to £727,748 from £851,176 in the preceding year. The highest-paid director earned £209,225, up from £206,983.
Sterling went through a period of adjustment following the untimely death in 2003 of former managing director George Knowles Jr, who took the reins at the firm from his father in 1985.
Knowles had steered the firm back into profit in 2002, where it has remained ever since. Mearns took over as managing director following his death.
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