Laura Ashley loss widens, new CEO takes over as retailer targets global growth
Just a day after Laura Ashley announced that it had secured the short-term funding it needed and on the day that COO Katharine Poulter stepped into the CEO's role, the company released its interim results. It revealed that its pre-tax loss after exceptional items had widened to £4 million in its fiscal first half, from £1.5 million a year earlier.
That bad news was attributed to lower Home Furnishings sales and also because of the revenue disruption caused by the change in its Japanese franchise partner.
Coming on top of the unexpected update it issued earlier this week that showed sales falling in double-digits, it painted a picture of a firm that has urgent work to do. But management was reasonably upbeat and said with sales being flat for the first seven weeks of the second half, it’s “encouraged by the early signs of the turnaround strategy”.
To recap our earlier story, its sales in the 26 weeks to December 31 had fallen 10.8% to £109.6 million from £122.9 million, with like-for-like sales down 10.4%. On Thursday, it expanded on the reason for the big drop and total sales dropping faster than like-for-likes, blaming the closure of three stores and weaker consumer confidence during the period.
Profitability was also hurt as margins during the period were affected by the weak British pound against the US dollar, as well as an increase in domestic costs, although operating expenses were slightly lower, down to £43.8 million from £46.5 million.
The company currently has 153 stores and its total UK sales fell to £106.5 million from £118.8 million.
It also has a UK webstore and trades in 10 European countries from that site as well. But the website didn’t seem to help it much during the period as its total e-commerce sales fell 15.5% to £22.2 million.
So what actually happened on the product front? Well, while the Fashion category has been a bright spot for the firm in recent periods, its sales fell this time, although not by much. This category includes adult fashion, fashion accessories and perfumery, and its sales dropped 2.3%, while like-for-like sales were flat on last year.
The company said it continues “to build on the success of our fashion ranges with a much stronger offering in contemporary and wearable styles. Our fashion range is further enhanced by the rich heritage of our archive and we will continue to use this unique and rich resource”.
And while the Fashion figures weren’t brilliant, compared to what was happening elsewhere, the category really was a star performer. For instance, the Home Accessories product category that includes lighting, gifts, bedlinen, rugs, throws, cushions and children's accessories, saw sales down 14.6%, with like-for-like sales down 13.7%.
Furniture dropped 7% with like-for-like sales down 6.2% and Decorating plunged 21.5% with like-for-like sales falling 20.9%. As a result, its design teams “are in the process of reviewing the mix of our decorating product offerings based on customer feedback and research”.
The well-publicised problems in the UK retail market suggest that its opportunity to return to growth is limited in its domestic market. So where does its opportunity lie? Clearly it’s in global expansion.
In the reporting period, its international ops contributed a tiny 2.9% of total group revenue even though it had 80 franchised stores (down from 90 a year earlier).
Internationally, the company has a master licence agreement with Itochu Corporation in place and it said it’s “hopeful that the Laura Ashley brand, already much admired in Japan, will make further inroads in building on our heritage”.
The company added that it will continue to develop its international presence and explore new partnership opportunities.
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