Laura Ashley's problems deepen

THE PROBLEMS continued at Laura Ashley yesterday when the struggling fashion and home furnishings retailer reported increased first half losses and plunging sales in current trading.

The accident-prone group, which appointed Victoria Egan as chief executive in August, said sales had fallen as it tried to move its stores away from the "mark-down madness" which has led its shops to woo customers with permanent discounts. Although selling at full price had caused a 19 per cent fall in same store sales on the first half last year, margins rose by four percentage points.

"Current trading remains challenging and turnover continues to be affected by a difficult retail environment," the company said. The shares fell 3p to a new low of 17p.

Reporting first half losses of pounds 7.9m compared with pounds 4.5m in the first half last year, the company said the business had now been stabilised, that it had cash in the bank and that its stock position had improved. "The turnaround will take time but the half-year results are in line with expectations," Ms Egan claimed.

The company said it had conducted fresh research into its target market. This had identified Laura Ashley's core customers as 30 to 35-year-old women with busy lifestyles and higher than average disposable incomes. The business now recognises that it had moved away from this group in the past two or three years, with fashion ranges aimed at younger women.

"We are now moving towards a more traditional Laura Ashley look," the company said yesterday. The business has appointed a new design director whose collections will start appearing in the stores next spring.

The company claimed its operations are profitable outside North America where a pounds 4m loss was recorded. Five of the larger format stores, pioneered by previous chief executive Ann Iverson, were closed in the first half and another five will shut in the second.

No buyers have yet been found for the three Welsh textile factories that were put up for sale in January and employ 630 workers. Stephen Cox, a Laura Ashley director, said no deadline had been set for a sale and that some interest had been expressed. However, analysts said that with several other textile companies closing factories, hopes of finding a buyer are fading fast and that closure was looking increasingly likely. A fourth factory in Holland has also not yet found a buyer.

Separately, fashion retailer Austin Reed said high street trading remains "volatile" and that trading at its flagship stores in London's Regent Street and Knightsbridge had been badly affected by a drop in tourist spending. Reporting a 19 per cent rise in underlying first-half profits to pounds 3.2m the company said it was pleased with the performance of its Country Casuals acquisition.

Group like for like sales are flat in current trading and pounds 200,000 of restructuring costs and a higher interest bill forced pre-tax profits down from pounds 2.5m to pounds 1.9m in the first half. Country Casuals' like for like sales showed a 3 per cent fall. The shares dipped 5p to 125.5p.