MFI, the UK's biggest furniture retailer, is pressurising suppliers to slash prices by as much as 10 per cent.
The retailer is understood to have written to suppliers demanding cuts of up to 10 per cent, although a typical reduction is likely to be in the 2 per cent to 3 per cent range. The reductions, backdated to January, could add an extra£7.5 million to profits.
Investec analyst Matthew McEachran said in a note: 'Clearly suppliers may resist, but many will capitulate, given their dependence on MFI.
It can rightly point to the upside suppliers are enjoying from fast sales growth.'
MFI continues to roll out its new store format, replete with bolstered upholstery and bathroom ranges, and aims to hit sales of£1.4 billion by 2006.
The store group has kitted out 90 shops in the new style and service-focused format introduced a couple of years ago. The refurbished stores are delivering results, with orders increasing by an average of 20 per cent in the first year and fully-refitted stores delivering uplifts of more than 25 per cent.
According to MFI, evidence shows that the operating margin in full-refit stores climbs from 5 per cent to 9 per cent post-refurbishment.
In line with the store environment, the product offer is being overhauled with new bathroom and upholstery ranges courtesy of The Bath Co and MFI's Sofa Workshop arm.
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