Laura Ashley recovery stalls

Laura Ashley shares collapsed yesterday as Ann Iverson, chief executive, admitted that her recovery programme for the fashion and fabrics group had run into trouble this year.

The shares plunged by 41p to 104p as the company issued a profit warning for the current year. A year ago the shares were trading at double the current level, buoyed by hopes that Ms Iverson could dramatically transform the group's fortunes.

Latest results for the year to 25 January did show the recovery well on course with profits before tax up 57 per cent from pounds 10.3m to pounds 16.2m and a doubling of the dividend to 1p. With group sales running at over pounds 300m a year, there were hopes among City analysts that this year profits might have been in the pounds 22m to pounds 24m range.

However, Ms Iverson has had to warn that profits for the current year, although ahead of last year "will be below current market expectations". Analysts quickly trimmed their forecasts back to between pounds 18m and pounds 19m. This implies earnings per share might only edge up from last year's 4.3p to around 5p a share.

Gross margins on sales remain stuck at around 5 per cent and the hope of margins in double figures will have to wait until 1998/99. Ms Iverson disclosed that delays in store openings meant her own "overly aggressive sales targets" for garment ranges were not being met and the company would have to cut prices to shift unsold merchandise. Latest accounts show stock levels shot up from pounds 66.6m to pounds 93.1m at the end of last year.

Ms Iverson, who took on the chief executive's role in June 1995 with a potential incentive package worth pounds 5m, still remains confident she is on the right track. In the North American market, which she describes as still the greatest vehicle for growth and profit improvement, there was a 26 per cent rise in selling space. But the expansion has still to make an impact on sales, which fell 9 per cent during the year. The UK operations showed a healthier 8 per cent sales increase but on the Continent turnover also dipped - affected partly by the strength of sterling.

Strong sterling wiped pounds 800,000 off profits last year. At today's even higher level it would have knocked another pounds 1.1m off the total. New store openings strongly feature in the current year.

Comment, page 23

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