Laura Ashley confirmed its investors' worst fears yesterday when it issued a long-expected profits warning and announced the closure of two of its factories in Wales with the loss of almost 200 jobs.
The severity of the announcement caused dismay in the City as the company said it would record a pounds 4.5m loss at the half-year stage and would only break even at the full year.
The warning, which included fresh disappointment about a slowdown in home furnishings sales, will intensify the pressure on Ann Iverson, the company's American chief executive who was paid pounds 1m last year, to step down. She was appointed 18 months ago to revive the ailing company's fortunes.
Laura Ashley has had a dreadful few months, with a string of senior executives, including design and buying director Basha Cohen, leaving the group. Now Ms Iverson has been forced to put US expansion plans, the central part of her new strategy, on hold. The shares, which have been as high as 220p in the past 12 months, closed a penny lower at 55.5p.
Nick Bubb, retail analyst at Societe Generale Strauss Turnbull, said: "It's pretty hopeless. It is a very real shortfall and there is no hint of an apology."
Another analyst said Ms Iverson's position was looking increasingly vulnerable: "She's paid a lot of money and she's made a lot of mistakes. Where is the accountability? If the business is not pointing in the right direction by next spring she will have to think again."
Ms Iverson said yesterday that she was determined to stay at the company and see her strategy through: "I am deeply committed and I believe the strategy is right. The potential of the brand has not been realised."
She said she did not regret returning to Britain from her native America to take the job: "Absolutely not. I believe the brand has potential but the scale of the problems were greater than anticipated."
Ms Iverson said Sir Bernard Ashley, Laura Ashley's widow, whose family speaks for 35 per cent of the group, had not discussed taking the group private. She said both Sir Bernard and the Japanese group Jusco, which also owns a substantial stake, were supportive of the strategy.
Ms Iverson will receive a pay cut to just her basic salary of pounds 450,000 this year as the performance of the company is too poor to trigger bonus payments
The pounds 4.5m first-half loss will include a pounds 1m charge for the closure of two garment sewing factories in Wales at Caernarfon and Machynlleth. The company will increase sourcing from overseas, though two other garment factories in Wales are unaffected.
The decision was criticised both by the unions, who blamed the closures on poor management, and the local mayor, William Jones, who said it was a devastating blow to local employment: "The saddest thing is that there is nothing else here. There is no other work for these girls."
Laura Ashley blamed its profits warning on a slowdown in sales following a return to full-price retailing, continued below-budget sales in new stores in the United States and a pounds 2m advertising campaign in America.
Laura Ashley will not open any further stores in the US until the new store performance improves. Ms Iverson said the company would continue to offer women's wear, children's wear and home furnishings. "The breadth of the brand is not the issue. It is the infrastructure," she said.
The company's systems have not been able to ensure that the right product reached the right locations at the right time. Group like-for-like sales were 11 per cent up in the six months to 26 July. However, adjusting the figures for currency effects brings the total to 5 per cent.
The company has been affected by boardroom departures, including its merchandising director and UK finance director. An announcement on the design appointment will be made soon.Reuse content