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Pruning at Ashley

The patchy nature of Britain's retail recovery was underlined yesterday when Laura Ashley, the company famous for its floral dresses and chintzy home furnishings, announced paltry profits and a plan to close stores in America and pull out of Australia altogether. The news comes in the same week that Tesco, the supermarket group, announced record profits and an expansion programme creating 4,000 jobs.

Laura Ashley, which like many retailers expanded too quickly in the 1980s, is closing more than 30 of its smaller, loss-making American shops. There are currently 190 branches of Laura Ashley in the US, 180 in Britain and 70 in Europe. The stores made profits of just £3m last year.

America has long been a graveyard for UK retailers and Laura Ashley has struggled to succeed there.

Due to heavy competition the American stores have only been able to sell around 30 per cent of goods at full prices compared to 70 per cent in the UK. It is closing smaller stores and opening larger ones that can accommodate the full range of clothing and furnishings.

Hugh Blakeway Webb, chairman, who is half-way through a restructuring programme, said: "The USA was once the jewel in our crown but we have shot ourselves in the foot by allowing our overheads to become too high. We have not been structured to make money there."

The company has been criticised for trying to sell too wide a range of goods in stores too small for the purpose. It now plans to stop selling food, rattan furniture and swimwear in all shops here and in the US.

New management is making cuts, and has already announced that it is cutting more than 200 management jobs and pruning costs at its offices in Eindhoven and Boston.

However, observers feel the company will return to health. Clive Vaughan, of the retail consultancy Verdict Research, said: "Things have not gone right for them. Somewhere along the line there was a rejection of that style. But there is still a place for Laura Ashley. It's a very strong brand . . .that strength will see it through."

The brand's recent problems contrast with the success of other retailers that have managed to restore their fortunes. Next, Debenhams and Marks & Spencer are all doing well.