Shares in troubled sofa retailer SCS almost halved today after a credit insurer refused to offer cover to five of its suppliers, sending its shares tumbling.
The company admitted this morning that the credit insurance firm, which it refused to name, would no longer insure the five suppliers against SCS being unable to pay them. It blamed the tightening of credit insurance terms across the furniture sector, following the credit crunch and consumer slowdown.
It said the move will "affect the working capital facilities of some of our principle suppliers".
Like many sofa makers, SCS provides a range of interest-free and delayed payment offers. This makes it particularly susceptible to a sudden slowdown in the consumer market.
"A lot of customers buy on credit, as with a lot of furniture retailers," a spokeswoman pointed out this morning.
Shares in the company were down 45% this afternoon, losing 13.2p to 16p. They were changing hands for 250p a year ago, but have steadily fallen since.
SCS said it was continuing to deal with its suppliers while "various financing options are being agreed".
Analysts said the credit withdrawal was a significant blow to the furniture sector, which was already under pressure as consumers rein in their spending.
Euler Hermes, the world's biggest credit insurer, recently withdrew its cover from sofa firm Land of Leather, which like SCS suffered very disappointing trading over Christmas and the January sales.
Fabrice Desnos, UK chief executive of Euler Hermes, warned last week that he expects to see more insolvencies in the retail sector.
tags
