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

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The Independent Online
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.