Home furnishings firm Caldeira hit by ‘perfect storm’

CALDEIRA, the Liverpool soft furnishings company, slid into the red last year as it was hit by a “perfect storm” of raw material cost hikes and waning consumer sales.

Despite growing sales by 5% to £21m – a 19th year of growth – Caldeira saw its margins hit and made a loss of £166,000 in the year to the end of December.

Among the challenges the company faced was a doubling of the price of cotton and inflation in other key commodities such as polyester.

The bottom line was also hit by investment in refurbishing the company’s chain of 14 retail stores, which trade as The Fabric Warehouse.

Sales grew in both of Caldeira’s overseas divisions, based in China and the US, but profit margins in all four trading subsidiaries by rising commodity prices and weak global demand for soft furnishings.

Founder and managing director Tony Caldeira said, “Considering the perfect storm that the company has faced Caldeira has traded well and continues to strongly outperform its rivals.

“The different divisions around the world were all hit by huge increases in raw material prices. Caldeira took the long term strategic decision to work closely with its global customer base and honour contracts which had been agreed earlier in the year, when cotton and polyester prices were significantly lower.”

“In the short term this hurt margins and profits but by helping our customers during these difficult times we have improved long term customer relationships and as a result we achieved a slight increase in sales in 2010.”

Caldeira UK, which is based at the Knowsley Business Park, remained profitable and maintained its position as the UK’s market leading cushion company. However sales fell due to the weak retail environment and the collapse of customers such as Ethel Austin in 2010.

The US business, based in New York, saw a 50% increase in sales and increased its retail customer numbers during the year.

Caldeira China, which is based near Hangzhou in Zhejiang province, saw its sales increase in 2010, however in addition to the commodity price rises, increases in labour costs, finance costs and the increase in value of the Chinese currency all hit profit margins.

Caldeira is now looking at the possibility of returning some manufacturing to these shores in response to continuing price inflation in China.

The retail business had a tough year, with bad weather denting sales at The Fabric Warehouse in early and late 2010. Sales of “big ticket” home furnishing purchases such as made-to-measure curtains were badly hit by the weak economy, low consumer demand and the lacklustre housing market.

Despite this stores in Cardiff, Cheltenham, Maidstone, Norwich, Reading, Weybridge and Winchester were significantly improved during the year.

Tony Caldeira added “Hopefully for Fabric Warehouse it will be a case of short term pain and long term gain.”

Trading conditions have not improved this year, evidenced by the demise of a number of retailers selling homewares and furnishings, including Habitat, TJ Hughes, Life and Style and Walmsleys.

Tony Caldeira said: ““2011 continues to be challenging for the Caldeira group with raw material prices remaining stubbornly high, continued weak global consumer demand, the continued weakness of Sterling and a difficult UK retail environment.”

“Over the years the Caldeira Group has reinvested its profits and as a result has a very strong balance sheet. This has helped the company through this perfect storm. I am confident that the company will emerge from this unprecedented trading period better, stronger and more competitive than ever.”

“When the global economy improves, Caldeira with its experience, flexibility and global reach will be in a strong position and the company will continue to outperform its rivals for the foreseeable future.”