Laura Ashley has confirmed that its Malaysian owner is locked in make-or-break talks with its bank over access to emergency funding as the fashion and furniture retailer revealed a steep drop in sales amid “challenging” conditions for the sector.
The company, which is listed in the UK, said it would have to “consider all appropriate options” if it could not get hold of more cash, raising fears for the jobs of more than 2,700 workers.
MUI Asia, controlled by the multimillionaire shareholder Khoo Kay Peng, and Wells Fargo are trying to reach agreement over Laura Ashley’s funding requirements in the short to medium term.
Sales slumped by 10.8% year-on-year in the final six months of 2019. The company blamed “market headwinds and weaker consumer spending”, which it said had dampened demand for larger, more expensive items. Sales were flat for the first seven weeks of trading this year.
The pressures on the retailer, which plans to close more of its 155 UK stores, have been exacerbated by a fall in stock levels after Christmas, which has reduced its ability to offer assets in exchange for secured loans.
Laura Ashley was started in 1953 by the eponymous late founder and her husband, Bernard, with fabrics printed on their kitchen table. The company became a stalwart of the British high street, and Diana, Princess of Wales, was a famous fan of its floral fabrics.
MUI became a shareholder in 1998, adding Laura Ashley to Khoo’s Malaysian United Industries empire, which also includes hotels, food and financial services interests. Andrew Khoo, the son of Khoo Kay Peng, succeeded his father as Laura Ashley’s chairman in 2018. The company has since endured a difficult time, with low consumer confidence and a weak housing market. It lost £14.3m in the year to 30 June 2019.
Andrew Khoo said: “We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging. There is however a robust plan in place to turn the business around and the board of directors is confident and optimistic that the recent appointment of Katharine Poulter [the incoming chief exceutive] will enable the business to execute this broad-based strategy.
“The major shareholders have indicated their continued confidence in the business and are fully supportive of the management team and execution of the transformation plan.”
Laura Ashley’s statement said the talks with its lender did not include a cash injection into the group, contrary to some reports.
Laura Ashley’s statement said it is “well advanced in developing its turnaround strategy”, but added that it was only at an “early stage” of carrying it out. Shares in the company, which is due to report its first half results on Thursday, slumped 38% to 2.24p.