Shares in Laura Ashley (ALY) slumped more than 11% in early trading after the fashion-to-furnishings brand reported an alarming lurch into the red. The company is blaming its underperforming Home Furnishing business.
The share price has since recovered some of those losses but remains close on 5% lower at 1.75p, valuing the business at less than £12.7m. It was worth more than £250m as recently as 2015.
Despite being debt free Laura Ashley is still refusing to re-start dividends with management concerned about ‘considerable market uncertainty’.
The company has issued two profit warnings since January. It hasn't paid dividends since early 2017.
READ MORE ABOUT LAURA ASHLEY HERE
For the year to 30 June, the Fulham-headquartered micro cap swung from a £5.6m profit to a loss before tax and exceptionals of £9.8m. The statutory loss was £14.3m (2018: £100,000 profit) and stuck after an £4.5m exceptional charge including the write-off of an investment in a Japanese associate company.
Worryingly for shareholders, the furniture, fabrics and fashion brand’s total like-for-like retail sales were down 3.5% with more expensive products bearing the brunt of frail consumer confidence, while like-for-like e-commerce sales slipped 14.2% lower.
KHOO EXPLAINS THE PAIN
‘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,’ explained chairman Andrew Khoo.
‘We have focussed on the reasons why Home Furnishings have underperformed and have taken necessary steps to mitigate this, including adding new contemporary product to our ranges. 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.’
ANY CRUMBS OF COMFORT?
Crumbs of comfort for long-suffering investors include the recent inking of a licensing deal with IMG to develop the Laura Ashley brand in China, as well as the continued resurgence of the fashion business, which achieved like-for-like growth of 9.2% last year thanks to improved designs.
Management is also talking up the prospects of Laura Ashley’s growing licensed hospitality business. This includes nine Laura Ashley licensed tearooms and two Laura Ashley licensed hotels. Management insists ‘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.’
Hammered by earnings downgrades, today’s downbeat full year figures are doing nothing to shake the stock from its torpor. Earlier this year, Laura Ashley’s bombed-out valuation stoked takeover interest from Flacks Group, although the Florida-based investment firm decided not to make a bid.
NO LOVE FROM BUBB
Langton Capital commentator (and retail guru) Nick Bubb says: ‘The market cap of Laura Ashley is down to only £13m and it is not particularly clear why the Malaysian parent still wants to maintain its public listing, not least as today’s final results are terrible, with the group plunging into a loss before tax and exceptional items of £9.8m.’
Bubb continues: ‘This is blamed on a collapse in Home Furnishing sales and Online sales…However, Andrew Khoo, the chairman, says that trading for the seven weeks to 17 August is performing in line with management expectations and that “Laura Ashley’s brand is built on beautifully designed, high quality products. We remain resolutely confident in the underlying strength of this much loved brand, in its relevance for today and in our strategies to both maintain and develop it.’