Fears for future of MFI

Fears were growing today for MFI, which is rumoured to be on the brink of collapse.

The company, which has stores in Wolverhampton, Dudley, Stafford, Birmingham and Kidderminster, is said to have been rocked by a sharp fall in demand due to the financial crisis.

Bosses are reported to be working around the clock to secure the future of the business, which was bought by Merchant Equity Partners for £1 in 2006 and employs 10,000 people nationwide.

MFI faces a quarterly rent bill on Monday and has allegedly written two letters to its landlords – one asking for a rent-free period and another saying it wants to continue trading despite going into administration.

Bosses today declined to comment but it is understood that four main options are being weighed up – a management buyout, further cash from existing investors, a sale to another private equity firm or administration. The company has 185 stores and experts believe it could fold next week.

The group was at the centre of speculation over a possible merger with Homeform, the owner of rival kitchens brand Moben, this month. Talks were also said to have taken place with Swedish retailer Nobia about combining its UK business Magnet Kitchens with MFI. Today, customers in the West Midlands were worried about parting with their cash.

MFI started as a mail order business and opened its first shop in Balham, London, three years later. Over the next 30 years it became the biggest furniture retailer in the UK with a value of £1billion.

Sales fell from £854 million in 2003 to £742 million in 2005 as companies such as Ikea, B&Q and Homebase began to dominate the market. It also suffered problems with its supply chain, with customers becoming increasingly fed up with delays and errors to orders, which damaged confidence in the brand.