Lossmaking Laura Ashley hails fashion strength, inks China deal
Laura Ashley reported its full-year results on Thursday and they didn’t make easy reading. For a start, the fashion-to-furnishings retailer made a pre-tax/pre-exceptional items loss of £9.8 million, much worse than the profit of £5.6 million a year ago.
And in the 12 months to the end of June, the statutory loss before tax was £14.3 million compared to a profit of £0.1 million in the prior year.
But there was some good news among the bad with fashion seeming to be on a roll and a deal to expand in China.
Sales fell to £232.5 million from £257.2 million and total like-for-like retail sales dropped 3.5%. But here’s the thing, while the company has reduced its reliance on fashion in favour of furnishings over a long period, it’s the fashion ops that are strongest now.
Like-for-like retail sales in the fashion segment powered ahead by 9.2%, continuing a series of strong results for the category.
Total fashion sales (which actually include adult fashion, selected girlswear, fashion accessories and perfumery) rose 4.2% as the company “built on a very strong performance in 2018” and it said it remains “confident that this level of growth can be maintained in what is an extremely competitive product category.”
That’s certainly something in a retail world in which good news about fashion sales is thin on the ground, especially from a company that has struggled for some time. But perhaps the current trend for ultra-feminine print dresses in natural fabrics is shining a spotlight back on a brand that was one of the big names in this area a few decades ago, even though that's not really a core part of its offer today.
That was where the good news ended with the company saying that total UK retail sales fell to £222.9 million from £236 million as it closed six stores and saw “considerable market uncertainty”. The company has 155 UK stores and cut its space by 3.6% during the period. In the year ahead, it plans to open two new stores but cut between five and seven more.
Meanwhile, its online revenue dropped to £51.2 million from £59.7 million in a market in which even the weakest retailers could be expected to chalk up rises in their webstore operations. Like-for-like e-commerce sales fell by 14.2%. But the company had an explanation for that given the work it has been doing on its e-tail business.
Chairman Andrew Khoo said: “The last 12 months have proved to be a difficult trading period for the group and indeed for the retail sector as a whole. The primary causes for the year-on-year drop in profit have been the performance of Home Furnishing and that of our website following a re-platforming exercise which took place in November 2018.”
He said the firm has “focused on the reasons why Home Furnishings have underperformed and [we] have taken necessary steps to mitigate this, including adding new contemporary product to our ranges. We have taken active steps to listen to our customers and now believe that we are on an appropriate recovery path. We continue to invest in our website and are working with our online service providers to ensure that it is optimised to deliver an enhanced customer experience and to achieve the desired growth.”
COMMITMENT AND CHINA
It all shows the controlling shareholders are still committed to the brand, as we saw not that long ago when an opportunistic approach to buy the brand was made. Back then they insisted they would plough on with Laura Ashley’s recovery programme and it looks like there’s no change in that attitude.
And to this end, the company has recently reached an international master licensing deal with IMG to market and develop the brand in China. “This partnership will give us greater access to customers and increase the distribution of our products in the market,” the company said, adding that “we will also be focusing on the Australian market with the first store anticipated to open in Melbourne in 2020.”
And Khoo added that he’s “delighted with the progress of our growing licensed hospitality business. There are now nine Laura Ashley licensed tearooms and two Laura Ashley licensed hotels. The pipeline of new licenses is very healthy as we enter a new financial period. We are especially pleased with the customer response to this initiative.”
The owners have been focused on cutting debt as well as as building international distribution and in the past 12 months disposed of a property in Singapore and a hotel property in Elstree. This enabled it to completely eliminate “all long-term debt and put us on a stronger financial footing for the years ahead.”
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