Laura Ashley puts factories up for sale as shares crash to all- time low

Shares in Laura Ashley crashed to an all-time low yesterday after the troubled retailer issued another profits warning and put five factories up for sale. Nigel Cope, City Correspondent, asks whether new chief executive David Hoare can turn the business around, or only clean it up for a quick sale.

Laura Ashley's fourth profits warning in less than a year was prompted by a dreadful performance in America, weak home furnishings sales and lower gross margins due to heavy discounting. Though management said its stock levels were now 25 per cent lower than last year there were reports that its shops were even allowing customers to haggle over prices in a desperate attempt to clear excess stock.

The business is now expected to record a pre-exceptional loss of pounds 23m- 26m in the year to January. Previous estimates by the company's broker had been for losses of pounds 15m. The shares lost a further 25 per cent of their value, falling 8.5p to 26p.

However, David Hoare, who replaced Ann Iverson as chief executive before Christmas, insisted that Laura Ashley still has a future as an independent business. "Can it be turned around? I think it has every opportunity. This business has an independent future," he said.

The company has decided to pull out of manufacturing and put five factories up for sale in order to concentrate on its retailing operations. The decision will jeopardise 669 jobs The sites under threat include four in Wales - two sewing factories in Oswestry and Gresford, the Texplan wallpaper and fabric printing operations in Newtown, a made to measure plant in Carno - and a small site in Holland.

The move will end Laura Ashley's long-standing relationship with the Welsh valleys. However, the company said that it hoped to sell the factories as going concerns, safeguarding the workforce. "It is a hard, tough decision. But initial reaction there is that this is the right thing to do," said Stephen Cox, the group's director of legal and commercial services. He said the decision would enable Laura Ashley to concentrate on brand management and retail.

It is possible that the company will also pull out of North America after a disastrous expansion there by Ms Iverson. It was a disastrous performance there which was behind a 4 per cent fall in like-for-like sales across the group in the seven weeks to 10 January. US sales collapsed by 13 per cent. Trading in home furnishings have been particularly weak with margins suffering from heavy discounting.

Michael Appel, a turnaround specialist, has been appointed as chief eexecutive of the North American operations to implement a recovery programme.

There are fears that mounting losses and possible exceptional costs relating to the sale of the Welsh factories could mean that Laura Ashley may run into further cash flow problems. Though fresh pounds 70m loan facilities were agreed with bankers before Christmas some analysts fear that on a month to month basis, the group will be in a precarious financial position.

Analysts speculated yesterday whether Sir Bernard Ashley, Laura Ashley's widower, who controls 35 per cent of the company may be tempted to take the company private. Another possibility is that Mr Hoare will slim the group down and cut costs leaving the group a more likely candidate for a trade sale. Some experts say the group could even pull out of retailing altogether and become a brand licensing company.

Ashley Thomas of SG Securities said: "The brand is still valuable but it may need to be part of a larger stable."

Olivier Roux, the former Guinness finance director, has been working at Laura Ashley as a consultant but has now stopped. The company is being assistant by a group of bankers from its advisers Goldman Sachs.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower