Furniture is retail’s hardest hit sector in a recession. High-profile names such as MFI, Land of Leather and The Pier have disappeared, ScS went into administration but survived and all have struggled. But one group seems to have bucked the trend, at least in turning itself around from four years of substantial losses into respectable profitability in its two latest years.

Steinhoff may not be a well known name in the UK, but the quoted South African-based group owns Homestyle, trading as Harveys, Bensons, Sleepmasters and Bed Shed, plus Cargo and now Reid Furniture, bought in 2009. With annualised sales of £500m, the combined retail operation is the UK third largest after Ikea and DFS, with some 600 stores trading from 500 sites. The UK accounts for nearly 20% of global revenues of R50bn (£4.31bn) of the vertically integrated conglomerate.

Steinhoff acquired Homestyle in 2005. Over four financial years, from 2004 to 2007, Homestyle made cumulative losses of up to £200m. Then, in the year to June 2008, despite the sharp market downturn, operating profit of £25m was posted on sales of £387m, followed by £32m in 2008/09 on sales of £411m. Breakouts between the formats are no longer available, but it seems Harveys gained share and profitability improved, but Bensons suffered lower sales while Bed Shed and Sleepmaster enhanced profitability.

Steinhoff’s investment and costly restructuring shows a long-term commitment to UK retailing. But question marks remain about the UK retail profitability turnround. Restructuring means there is now a separate property entity, while UK operations are part of an intermediate European entity, Steinhoff Europe AG in Austria. The strategy is to sit out the recession, gain market share and be well placed for the upturn.