Sterling Furniture believes it has a found a way to ride out the recession - and as the economy dims, one of Scotland's best-known brands yesterday insisted it will continue to turn in hefty profits in one of the toughest of sectors.

Managing director Gordon Mearns' confidence is noteworthy, as Sterling now faces one of the most challenging retail environments in years and sales of big-ticket items - including furniture - have been tumbling in the face of declining orders, especially those connected to a downturn in the property market.

"There is no question about it, this is an extremely challenging market," Mearns told The Herald in a telephone interview yesterday. "The mixture of low consumer confidence and oversupply in the market has kept pressure on sales and margins. On top of that, the purchase of new furniture is obviously linked to the property market, which we all know is not doing particularly great right now.

"But in saying that, we are doing all the things we are supposed to in a downturn - upgrading showrooms, making supply chain improvements, keeping costs down, improving product layout and generally bettering the customer shopping experience.

"This is definitely a time to look after the customer and the customer will look after you. And I believe that will get us through the downturn."

Asked if the product discounts were deeper and more unseasonal than in previous years, Mearns said: "We have some excellent offers that reflect the general economic conditions out there.

"I'd say there has never been a better time to buy furniture, or any other big-ticket item for that matter."

At the same time, the managing director's confidence is backed up by impressive financial results, The Tillicoultry-based family business, which achieved a national profile through the long-running tele-vision advertisements starring sports presenter Dougie Donnelly, reported a pre-tax profit for the year to the end of February of £2.7m, compared with £2.2m the year before.

Sales climbed to £45.9m, against £40.1m last time, on the back of upgrades at its some of its six Sterling showrooms and another acquisition.

The company owns a further five furniture businesses - including a recent acquisition, which it declined to name - which it operates under other names.

Mearns said the acquisition was "currently being inte- grated into the Sterling operations and is expected to contribute to profitability within the next financial year" and will help margins by improving the economies of scale.

Mearns also said he was "extremely pleased with the results, which were achieved because all our hard work and the quality of our products" - but he conceded that they pertained to the period before the Scottish property downturn began to take bite in the spring.

He added: "Turnover will be up this year because of the acquisition, but on a like-for-like basis it will be down and profitability will really be under pressure. This is certainly the toughest market in living memory."

Sterling now appears to be maintaining its momentum after coming 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, boosted over the past few years under the stewardship of Mearns, the former company secretary.

Meanwhile, Mearns yesterday also said that while the company was suffering beneath the rising strength of the euro against the pound - particularly because much of its furniture is sourced in Italy - the company was getting a bigger gain from its dollar-pegged Asian supply markets.

Means added: "We fully intend to weather this storm. Good businesses will always come through times like these."

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