Laura Ashley slashes price of rights issue

Laura Ashley, the struggling fashion and home furnishings retailer, has slashed the price of a rights issue that it hopes will help it turn the corner after a dismal start to 2003.

The group, which has issued two profit warnings since the start of the year, will raise £8.2m by selling one new share at 6p for every four owned in a fully underwritten rights offer. It had originally priced the issue at 8p.

The company will use the money to fund its retreat from the Continent, where its 65 outlets have seen sales dive. The 46 stores it plans to close, two-thirds of its European portfolio, are estimated to have made a loss before tax and exceptional items last year of £6.2m. It has already shut 16 of the planned 46.

Although Laura Ashley did plan to continue running 19 stores in a handful of countries across Europe, it revealed yesterday that it had been approached about the disposal of all of its 41 remaining European stores. It said the proposals were "at an early stage" and "subject to a number of detailed terms and conditions", adding there was no assurance that any would materialise. It declined to comment on the identity of the parties involved.

Laura Ashley hopes to strike franchise agreements with the purchasers if the deals go ahead. Selling the stores rather than closing them would reduce the group's costs by about £2.5m, it said.

Laura Ashley confirmed that it expected to report a loss before tax and exceptional items of £4.9m, or £14.1m after exceptional items. This was in line with its profit warning last month.

The group said total like-for-like sales in the eight weeks since its current financial year started on 26 January, had risen by 3.7 per cent. This included a 7.1 per cent increase in the UK. In the 11 weeks to 12 April, total like-for-like sales fell 1.4 per cent, while the UK was ahead by 1.8 per cent – although the comparable period last year included Easter.

The fundraising is fully underwritten by the group's major Malaysian shareholder and Bonham Industries and the Bank of East Asia.