Laura Ashley celebrates sales surge with store expansion plan

Laura Ashley is opening up to 20 new stores over the next year in a confident gesture that suggests its recent woes are finally over.

A return to form helped the furniture-to-fashion retailer climb back into the black during the first six months of its year, although it opted not to pay a dividend. Despite scaling back its clothing ranges, fashion was the group's strongest performing division, posting a 45.5 per cent rise in underlying sales during the first half. The retailer benefited from fashion's obsession with dresses over the summer, with designs drawn from its heritage prints proving particularly popular.

Lillian Tan, who to date has shown more staying power as chief executive than any of her 11 recent predecessors, put the group's stronger performance down to overhauling its product ranges. "The core traditional values are still there but with new inspiration," she said.

An easy comparison with the previous year meant the group managed to grow its like-for-like sales by 13.2 per cent during the six-month period, although the rate has since slowed slightly. David Cook, the finance director, said the group "could not expect" to maintain a double-digit rate of sales growth during its second half. "It will moderate," he added.

The group posted an interim profit before tax of £3m, against a £200,000 loss during the previous period. It paid its first dividend since 1997 in July but wants to wait to see how the second half pans out before committing itself to a second payout.

Furniture, which is now the group's biggest division with 29 per cent of total sales, was its slowest growing with a 1.5 per cent rise in like-for-like sales. But this came in a period when rival furniture retailers were forced to slash their prices to shift any stock at all. Laura Ashley said the market trend favoured "distinctive printed fabrics on upholstered furniture", which played into its hands.

Sales of its home accessories, including lighting and rugs, rose 10.1 per cent on an underlying basis. Its Art Deco-inspired mirrored storage and jewellery boxes were a particular hit. Within its decorating division, which reported a 10.7 per cent rise in like-for-like sales, its wallpapers sold well as people sought to bring more colour and pattern back into their homes after years of minimalism.

Ms Tan said the group would seek to add 100,000 sq ft of new retail space over the next year. The group has shaken up its UK retail estate, closing smaller stores in favour of opening outlets that can showcase all of its ranges.

The group's decision to pare back its clothing ranges hit sales from its international franchisees. Franchise revenue dropped by 18 per cent to £9.8m during the period. It is seeking a new franchise partner in the Middle East.

Ramona Tipnis, an analyst at the group's brokers Numis, said the figures were better than expected. But she added: "We are remaining fairly cautious because we want to make sure this recovery is not just a blip and it is there to stay."