Fashion and homewares retailer Laura Ashley has revealed it barely broke even after “difficult” trading and hefty writedowns on a property sold in Singapore saw profits crash to just £100,000.
The group, which is famous for its floral print designs, saw annual statutory pre-tax profits tumble from £6.3 million the previous year as retail like-for-like sales slid 0.4%.
But its under-pressure shares surged 15% as underlying profits came in better than feared, despite dropping a third to £5.6 million for the year to June 30, against £8.4 million the previous year.
The group said its statutory profits were dragged lower by a £4.7 million hit on the sale of the Singapore property, which had originally been bought to become its Asian headquarters under plans to expand into the region.
Laura Ashley chairman Khoo Kay Peng said “difficult trading conditions” seen in the first half had continued into the final six months, with “margin pressure and the impact of a changing retail landscape” also pushing profits lower.
He said trading was set to remain “challenging”, but added the group is “resolutely confident in the underlying strength of this much-loved brand”.
Sales since the year-end have been in line with its expectations, the group said.
UK retail sales dropped 6.3% to £236 million over the year to June 30 amid uncertainty in the market and the closure of stores.
Laura Ashley opened one store and shut eight across the UK over the year and revealed it plans to close another five in the year ahead, with two new outlets opened.
It said furniture sales were knocked in particular by weak consumer confidence, falling 4.1% on a like-for-like basis as shoppers put off buying expensive items, such as sofas and beds.
The group’s home accessories category, its largest division, saw like-for-like sales rise 2.9%.
Sean Anglim, chief financial officer and joint chief operator officer at Laura Ashley, told the Press Association the group had launched more competitive, cheaper products across its furnishing and decorating ranges in response to the weaker consumer confidence.
“We’re fundamentally happy with the range – there’s not anything wrong with it, but we do need to be a little bit more understanding in terms of price and have more at the competitive end,” he said.
But the group said it was “encouraged” by its performance online, with like-for-like internet sales up 4.1% and now accounting for 25% of retail revenues.
Its fashion division was also a bright spot, with comparable sales lifting 9.7% in an “extremely competitive sector” thanks to a refreshed range after new leadership was hired for the division a year ago.
Laura Ashley said it was looking to expand its new hotel venture, with plans for more hotels across the UK and internationally after the success of its franchised hotel in the Lake District, The Belsfield.
It will also add to its fledgling tea rooms chain, with two more due to be added in October after the first was launched in Solihull in June last year, followed by the addition of another in Burnham Beeches, Buckinghamshire, last month.
Mr Anglim said the group’s plans for international and Asian expansion remain on track despite the sale of the Singapore property, for 54.5 million Singapore dollars (£30.3 million).
Retail analyst Mark Photiades at Cantor Fitzgerald said it was “another challenging year for Laura Ashley with a further contraction in profits”.
“Whilst disappointing, there are some positive signs emerging, including strong like-for-like growth in fashion,” he added.