Laura Ashley issues profit warning despite fashion improvement

Some retailers have been buoyant in the past year. Some have endured a tough time but maintained an upbeat stance… and then there’s Laura Ashley.

Laura Ashley

The fashion-to-furnishings specialist on Thursday issued a profit warning saying full-year earnings would be less than analysts expect as the retail backdrop remains challenging and the first half saw sales and profits dropping.

Let’s look at the figures. In the 26 weeks to December 31, total group sales fell 7.7% to £134.7 million from £146 million after it closed 25 stores. Comparable retail sales were down 0.5%. Pre-tax profit plunged to £4.3 million from £7.8 million and it saw margin pressures due to the weakness of the British pound. The gross margin fell to 38.5% from 41.4%.

At least its online sales rose, by 5.1%, to reach £26.9 million from £25.6 million a year ago.

And its fashion division (which now accounts for only 17% of its total but includes both fashion and beauty sales) offered a crumb of comfort. They fell only slightly in the UK, despite the closure of six stores there. They were down 1%, while comparable sales were up 1.2%, beating the overall comp sales figure for the company. Laura Ashley said it’s “very encouraged by reaction to the new season collections and the progress which our fashion made during the second half.”

But that couldn’t disguise a first half that was generally very weak. The firm’s chairman, Tan Sri Dr Khoo Kay Peng, said that “trading conditions continued to be challenging” and after a review of what’s likely to happen in the rest of the fiscal year to June 30, it doesn’t expect those challenges to ease.

So is there any cause for optimism? Well, as we’ve seen, fashion is gaining a bit of ground and the online rise was a bright spot. And with the company launching a new digital platform during the current half, it expects “that this will help us to deliver further growth with its enhanced functionality.”

Internationally it’s expecting a better performance in the future too. The firm has already announced the termination of its licensing agreement with Aeon Holdings in Japan, Taiwan and Hong Kong, that will take place in September. On Thursday it said that this “gives us the opportunity to develop the brand presence ourselves in these territories through a licensing and online model. We expect that this model will be profitable as the brand is well established and respected.”

It’s also going to continue to develop its international presence and “explore new partnership opportunities” with a brand new Thailand license the result of this. It’s also expanding the number of platforms its website is available on in China and those platforms have seen “encouraging” growth so far.

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