Retailer Laura Ashley has mounted a vigorous defence of its decision to ask suppliers for price reductions, as strong sales of home furnishings produced a leap in annual profits.
This follows the homewares and fashion chain demanding, in a letter to its suppliers this month, an “immediate cost price reduction of 10%”.
Sean Anglim, the chain’s finance director, insisted it had “very strong relationships with all our suppliers” but said: “Our over-riding objective is to get the best price for our customers.”
He added: “We took a 1.9% margin hit last year because we felt we had to be more promotional [on price].” The reduction in its gross margin was also driven by Laura Ashley stocking more lower-priced products, in a fiercely competitive market.
Anglim further explained that the group manufactured 20% of the home furnishings it sells, such as paint, wallpaper and made-to-measure curtains.
Laura Ashley posted a 9.2% rise in annual profits over the year to January 26. Its home accessories category was its “star performer” posting an 8.5% leap in sales at stores open at least a year, which Anglim attributed to new products and improvements to existing lines.
But its fashion department had a year to forget, with underlying sales down by 4.8%.
Group sales rose by 4.5% to £298.8 million over the year. Laura Ashley has shrugged off the recent snow to deliver a 2.7% rise in underlying sales in the first two months of its financial year. It held its total dividend at 2p a share.