The embattled furniture group, which has issued a stream of profit warnings this year, is the latest in its sector potentially to suffer from credit fears as the big-ticket sector bears the brunt of the consumer slowdown.
The talks with Euler Hermes follow the revelation last week that rival furniture retailer Land of Leather’s suppliers had cover withdrawn by the insurer. Two of the ad agencies that MFI wanted to hire for a£24 million marketing campaign also had their cover cancelled, although the retailer subsequently switched its campaign to another agency.
Despite Euler Hermes’ concerns, it is understood that other credit insurers have not withdrawn cover from furniture groups.
There has been speculation that Euler Hermes would withdraw cover from almost the entire UK retail sector. However, Euler Hermes marketing director Jonathan Swabey denied that this was the case.
He said: “There is no withdrawal from the retail market, because if we do that we are shooting ourselves in the foot. We have a selective approach to any particular risk.”
He added that the risk associated with covering all business sectors in the UK – not just retail – had increased by about 15 per cent compared with last year and declined to specify if this was higher in specific retail sectors.
However, ongoing worries about credit insurance will add to the difficulties of furniture and furnishings stores. On Tuesday, BRC May retail sales data showed a 1.9 per cent like-for-like rise and total sales up 4.6 per cent. However, sales of furniture – especially sofas and beds – were described as “very difficult”.
BRC director-general Stephen Robertson said: “The housing slowdown and tighter household budgets meant that furniture sales were well down on a year ago.”
ScS declined to comment.
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