Sterling Furniture Group has embarked on bold expansion plans as its new leadership team strives to awaken a “sleeping giant”.

The Tillicoultry-based furniture retailer, which trades from 10 showrooms across Scotland, made 50 redundancies and shut stores last year as the company responded to a “historic lack of action taken to address the cost base”.

The cost-cutting driven was overseen by new chief executive John Pattison and designed to put the company on a more sustainable footing to prepare it for growth.

Mr Pattison joined Sterling, which celebrated its 50th anniversary last year, in August as its first chief executive from outside the owning family, following the departure of long-standing boss Gordon Mearns in March. Mr Mearns’ exit was announced as the company appointed a trio of third generation family members to the board.

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With the backing of a new executive team, including chief financial officer Kenny Barclay who joined in October, Mr Pattison has moved to restructure the company. Around 50 jobs were cut across a number of sites, while the decision was taken to close non-performing showrooms.

Mr Pattison said the moves, which have left Sterling with a workforce of between 425 and 440, were made to “right size” costs and put it in a position where it could plan for growth.

The executive, who spent four years as commercial director of Sunderland-based ScS before joining Sterling, likened the company to a “sleeping giant”.

He told The Herald: “I think Sterling has phenomenal potential to realise. It has been a solid business across five decades now but, given the foundations we have, the next decade could be really exciting [with] very interesting opportunities coming to us.

“With a new strategy in place, [there is] an opportunity for us to really grow into something quite special, something that both the family who own the business, the team, and indeed Scotland can be proud of.”

A new finance package worth £10 million has been secured with Royal Bank of Scotland which provides Sterling with firepower to grow its store network.

It has agreed heads of terms for a 50,000 square foot site in Hillington formerly occupied by car retailer Peter Vardy, where it plans to open a Sterling Home. It also plans to invest in its current outlets such as Fort Kinnaird in Edinburgh, where it recently signed a new 10-year lease. “Between the two sites we are likely to spend £2.5m this year,” Mr Pattison said.

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A further Sterling Home is on the cards at an undisclosed, major Scottish city, which is expected to open in the spring of 2026.

At the same time, the firm also plans to invest in its “beloved” Forrest Furnishing brand, which is more value-led and traditional, and currently operates from a site on Glasgow’s South Street. It aims to trial the brand in smaller retail parks. “We think there are two approaches we can take to the market,” Mr Pattison said.

Writing in Sterling’s latest accounts, published today, directors underline a “historic lack of action taken to address the cost base of the business” which they linked to a “material decline in profitability” over the 18 months ended August 31, 2023.

The accounts show pre-tax profits dropped to £43,870 versus £4.15m for the 12 months ended February 28, 2022, which also reflected Covid-19 support measures such as furlough and non-domestic rates relief coming to an end. The impact of geopolitical tensions, such as the war in Ukraine and the Middle East, were cited alongside the cost of living crisis. Turnover was booked at £83.7m, up from £55.5m.

Asked what he has found to be the biggest challenges since joining, Mr Pattison said: “Really when you look at our P&L (profit and loss account) from top to bottom, there is opportunity within it.

“The business had invested quite heavily in the three to four years before Kenny and I joined and hadn't seen the return coming through. Largely that was because during the middle of that we had the pandemic. Clearly that had a significant impact on the ability to trade and the way it might have hoped to.

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“During that time, and you will see it from the accounts, a significant level of benefit came into the business through rates relief and furlough and that money was invested [and] Sterling Home was born.

“But we didn’t see the return at the top line that you would expect to see from that investment, so we have got to drive a little bit harder on why that is. The concept is great, the stores look fantastic, but maybe we could have done with a bit more focus on changing the product, and segmenting our offer to get after the customer groups where there are potentially more pockets of disposal income.”

Despite investing to expand, Mr Barclay said the firm is on track to grow profits in the year to the end of August. “Even with the challenges that we talk about in the marketplace and the amount of work we have done internally in terms of restructuring, we do expect to be delivering an increase in pre-tax profit for this year.”