A TEES Valley furniture company has defied the high street gloom, but warned there could be tough times ahead as rocketing raw materials prices are squeeze profits.

Middlesbrough-based Barker and Stonehouse has delivered a strong set of end of year results despite low customer confidence and a depressed housing market stifling demand among many retailers.

The plight of the UK consumer returned to the fore this week as the latest official figures showed retail sales slumped more than twice as much as anticipated in May. Home Retail Group, which owns Argos and Homebase said conditions were "more difficult and volatile" than it anticipated at the start of the year, and Justin King, Sainsbury's chief executive, warned that trading was the toughest he had seen in nearly three decades in the sector. Economists blamed a combination of job insecurity, a slow housing market, wage freezes and high inflation for peoples reluctance to spend.

Barker and Stonehouse, however, the UKs biggest family-owned independent furniture firm, saw its pre-tax profits increase from £1.8m to £2m in the year to March 31, while its sales were also up from £43.5m to £43.7m. Despite the tough trading conditions, the firm has not had to make any redundancies from its 260-strong workforce.

The firm has an extensive customer database and uses the latest social media and regular in-store events to keep pace with changing customer tastes. In response to customer feedback it has invested in upgrades to some of its stores, including a new flooring department at its branch in Knaresborough, North Yorkshire, and a new design studio at its Newcastle store. Managing director, James Barker believed the decision to invest had helped to maintain the companys competitive edge. However, the firm expressed caution about future profits amid rising raw materials costs, which are proving to be difficult to pass on to increasingly price sensitive customers.

It also has a healthy balance sheet, with shareholders funds up from 12.2m to 13.3m during the year, while net current assets increased from £2.8m to £3.4m.

Barker and Stonehouse was set up in 1946, in Stockton, by two ex-RAF men, Charles Barker and Alex Stonehouse. It has four stores in the North-East in Darlington, Middlesbrough, Newcastle and the Metrocentre, Gateshead, and three in Yorkshire. Mr Barker noted that conditions remain "difficult" for retailers and that he would be happy to see a repeat of last years performance in the upcoming months.