German retreat to cost ailing Laura Ashley £8m

Laura Ashley, the troubled clothing and home furnishings group, is beating a retreat from Germany and closing 35 shops across the Continent in a move that will cost it nearly £8m.

The move to hack back its presence on the Continent will leave the group with just 18 shops there, all of which it says are profitable and it now wants to transfer into franchises.

The closure programme – which could see up to 300 staff lose their jobs – will cost an estimated £7.7m and the group is planning a £9m share issue to cover the cost.

The news is the latest disappointing announcement from a group that has struggled to cope with a slowdown in demand for clothes and furnishings. The shares, which have fallen by more than 60 per cent in a year, were down 0.75p last night at just 8.75p.

Laura Ashley said it plans to pitch the proposed rights issue at about 8p a share. The issue is expected be underwritten by its main shareholders, Malaysia's United Industries and Bonham Industries.

The latest closures are on top of a £1m decision in November to close 12 shops in France and Germany. Earlier this month the group said it had a disappointing Christmas and that results for the current year would be "substantially lower" than market forecasts.

David Cook, chief financial officer, said a six-month search for franchise partners for its profitable Continental shops had yielded interest "but no formal offers yet". He said the German retail market remained difficult and there had been little interest from potential franchise partners in that country. "The German economy is clearly suffering," he said.

Laura Ashley owns and operates 209 stores in the UK. The transfer of the remaining European shops to franchise partners will put them on the same footing as some 250 stores elsewhere around the world.