Sofa sales sink ever further

This follows poor trading over the previous Bank Holiday and equally shocking weather over the Easter period. Taking the worst of the hit on their share prices was the deadly (for investors) duo of ScS Upholstery and Land of Leather, which have both fallen by more than 10 per cent over the past few days.

There seems little respite for both operators who have seen their share prices decimated over the last 18 months. When we last wrote about ScS in January it had fallen from a 12-month high of 530p in January 2007 to stand at 56.5p and its latest like-for-like sales order intake showed a decline of 16 peer cent.

Here we are in late-May and things are no better as the share price has dipped to 37.5p (just above its recent low of 34p) and its like-for-like sales order intake for the eight weeks to May 10 showed a decline of 14 per cent. This closely matches the rest of the year as it recorded a fall of 15 per cent for the cumulative 41 weeks of the current financial year.

Such a continued decline prompted the company to state on May 14 that it expected to record a loss for the year to July having previously predicted break even. This news pushed broker Numis to slap a 'Sell' recommendation on the shares and sound extremely cautious notes about the company especially since it is now in the situation where its statements include updates on paying suppliers and the level of cash on hand.

Over at Land of Leather it is a similar story with much talk about conserving cash. A welcome annualised saving of £11 million has been earmarked - with over half of this down to reduced advertising spending, which will be brought down to approximately £15 million per year. Any avoidance of a repeat of its Christmas advertising spree of last year will be welcomed as its blanket Sales campaign wore thin long before Boxing Day.

With financial budgeting of such critical importance it is not surprising that both companies have ceased their expansion programmes. Both have opened one store over the past quarter but neither have any plans to open another until there are signs of improvement in the retail environment.

We may be in for a long wait as like ScS the like-for-like sales order intake at Land of Leather is also down substantially. For the 39 weeks to April 27 they dropped 20.7 per cent with the most recent 13 weeks showing a worsening position as the fall was a seriously big 32.1 per cent.

With trading at both companies almost in freefall on the back of deteriorating consumer spending patterns there remains very little to recommend either retailer. Until there is some pick-up in demand for big-ticket items then ScS and Land of Leather will continue to remain out of favour with the City and look increasingly precarious the longer the downturn goes on.

Broker Investec had a target price on Land of Leather of 45p at the start of May but with the shares now trading around the 19.5p level this highlights just how swift the fortunes of retailers in this part of the market are declining.

With this backdrop it would take a seriously brave investor to call the bottom of the fall in the share prices of these two retailers and take even the smallest of punts. It's probably a safer bet to go out and buy a new sofa - but whether you'll still get 10-years of interest free credit is questionable.