Laura Ashley drops dividend plans

Laura Ashley, the retailer best known for its floral dresses, hit fresh problems yesterday when it announced a sharp fall in sales and announced it was suspending plans to return to the dividend list.

Shares in the high street group, which issued a profits warning in January, plunged 16.5 per cent to 19p on the news. There was also speculation that MUI, the Malaysian conglomerate that owns 43 per cent of the stock, might take the company private. However, this was dismissed by the finance director, David Cook. "I can't speak for them but I am not aware of any plans for that." It is understood MUI is committed to Laura Ashley remaining a public company.

The latest setback has seen underlying fashion sales in the first quarter fall 5 per cent on the same period last year. While the UK has remained relatively stable, with underlying sales down 1 per cent, like for like sales in continental Europe are down by 21 per cent. The home furnishings division has prospered with like for like sales up 8.7 per cent. Plans to expand further into Germany have been put on hold until the local economy improves.

The group said buying mistakes had resulted in a poorly received spring collection. The company also overreacted to 11 September, cutting orders in the immediate aftermath of the attacks only to find it was short of stock when demand recovered. Teething problems with a new till system was another factor.

Mr Cook said Laura Ashley had been affected more than many other retailers by tourist numbers falling in key markets such as Windsor.

Pre-tax profits were flat at £8.6m, though earnings per share of just 1.37p left nothing to pay shareholders by way of dividends. The company last paid a dividend in 1997. "Obviously we'd very much hope to be able to pay a dividend next year, but I can't make that commitment and we'll have to see the results," Mr Cook said.

The group said it had no plans to downsize or sell its fashion business. "Home furnishings and fashion are two sides of the same coin. They make up our heritage and it's important to us we maintain both," a spokeswoman said.