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A major restructuring designed to haul the loss-making MFI furniture chain back into the black is likely to cost up to 1,500 jobs.
The group, which also includes the Howden joinery operation and Sofa Workshop chain, plunged £110m into the red last year, against a £20m profit in 2004.
Yesterday, the new chief executive, Matthew Ingle, outlined plans to revive the struggling group. They include the closure of two factories in Stockton-on-Tees and Scunthorpe - which make electrical appliances and doors for fitted kitchens - with the loss of some 1,100 jobs.
There will also be at least 11 MFI store closures, with 95 job losses, and another 95 redundancies in the Sofa Workshop chain, which is to be sold. An additional 180 jobs will be trimmed from the home-delivery operation. The restructuring will cost £34m, plus £12m in fees and £36m of asset write-offs. It will generate savings of £11m this year and £23m a year from 2007.
The group has now been split into three arms - retail, Howden and supply - with separate managements and accounting.
Mr Ingle, who previously ran the 340-strong Howden chain, said he found it almost impossible to discover who did what when he took over last autumn. He described the strategy pursued by his predecessor as "flawed" and the group's pricing policy as "chaotic". The previous chief executive, John Hancock, was fired last October after four profit warnings. Yesterday MFI revealed that Mr Hancock was in line for a golden handshake of £1.4m.
The new chief executive has already secured a £150m loan and sold MFI's French business for a better-than-expected £92m.
Mr Ingle denied speculation that he would take the 200-strong MFI chain upmarket but said he would stop selling kitchens at "mad prices". Under the former management, MFI offered a six-unit kitchen for £99. The cheapest will now be £500. MFI is to focus on kitchens and bedrooms and stop selling most other furniture and bathrooms. The ranges on offer will also be thinned out.
Kitchen unit doors and appliances will now be sourced from Italy and Turkey. MFI makes some 50% of what it sells but that proportion will fall to 25%.
Mr Ingle also plans to improve customer service and home deliveries. Last year only 40% of deliveries were complete and it cost £36m - on top of the £100m cost of initial deliveries - to put mistakes right. Some 60% of deliveries are now right first time but Mr Ingle is testing local delivery centres, so that customers can get mistakes put right quickly rather than have to deal with a warehouse which could be 200 miles away.
Howden, meanwhile, is scheduled to open 30 additional outlets this year.
Analysts were impressed at Mr Ingle's first moves but remain concerned about prospects. The group's underlying loss, excluding one-offs, was a better-than-expected £600,000 but the previous year it had a £54m profit. Margins are improving and the shares closed up 2.25p at 91.75p.
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