Sterling hit by credit crunch and falling pound

Published on Thursday 3 December 2009 20:35

STERLING, one of Scotland's biggest and best-known furniture retailers, has seen annual profits tumble 60 per cent as it felt the heat from the credit crunch and higher import prices.

The group said the fall in profits from 2.7 million to just over 1.1m in the year to 28 February had also been affected by acquisition costs.

Sterling, which is based in Tillicoultry, where it runs the biggest of its eight stores, bought Sofa Trend in early February 2008, but the business was not consolidated in the previous set of accounts.

Newly filed 2008-9 accounts show overall turnover rising from 45.9m to 49.2m. However, stripping out the positive impact of the acquisition, sales on an underlying basis fell to 39.5m.

Writing in the annual report, Sterling's directors blamed the weaker financial result on a string of factors.

"The retail sector was very difficult throughout last year, particularly in the homewares market," the directors said. "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.

"In addition, the collapse of the pound against the euro and US dollar adversely affected the cost of imports."

However, the directors described the outcome as "satisfactory" in light of the "unprecedented challenges" faced by the group throughout the year.

Sterling was set up 35 years ago by George Knowles, after witnessing the growing popularity of out-of-town retail developments in the United States.

He converted a disused mill in Tillicoultry into the largest furniture showroom in Scotland.

The latest set of accounts also reveal a rising headcount. Total staff numbers hit 500, from 458 a year earlier, with the bill for wages, social security and pension costs rising to 9.7m from 8.2m.

Total boardroom pay fell from just over 818,000 to 692,600. The highest-paid director received 196,000, up about 2,000 from a year earlier.

Furniture retailers have been among those worst hit by the recession.