A Plimsoll study into the profitability of the UK's largest furniture retailers has revealed a widening gap between firms making outstanding profits and those losing money.
The latest Plimsoll Analysis found average profit margins have fallen to 4% of sales, and 479 of the UK's top 991 furniture retailers are now running at a loss – a finding that, says Plimsoll, might lead one to believe the industry was suffering with chronic oversupply, rising costs and severe pricing issues. However, the same study has revealed that 105 businesses are making record profits.
David Pattison, senior analyst at Plimsoll, says: “Sometimes the public perception of profit is wrong. It's seen as companies taking advantage of their position or exploiting their commercial advantages unfairly. But these successful companies should be proud of their achievements. In an industry not known for its successes, these businesses should act as benchmarks to the rest of the industry showing what can be achieved.”
Of those 105 rich companies, the average profit margin is 10.1 % - way above the industry average. 72 of these firms are operating completely debt free, and the average sales value per employee is £115,400.
Of the 479 poor companies, 229 are now considered to be a high financial risk. For 295 of them, this is the second year in a row of making a loss. On average, these companies are losing -3% on sales – so, for every £1 of sales, it is costing them £1.03 to deliver.
David adds: “The latest Plimsoll Analysis highlights that the industry is being split into two types of company, and the gap between the rich and the poor is getting bigger and bigger. For the companies that are falling behind, they need to re-evaluate their strategy and retain profit in order to improve their financial strength.”
The Plimsoll Analysis, which is also available in an online format, provides an individual profile of each of the UK’s top 991 furniture retailers. It offers an overall financial rating and a valuation, as well as an acquisition attractiveness assessment on each company.
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