Shares in Laura Ashley were up over 16% this morning (20 February) after the UK clothing and home retailer revealed it has secured a loan agreement that will allow it to meet its immediate funding needs.

The retailer said talks with the US bank Wells Fargo over the group’s immediate funding requirements – involving the terms of a reported GBP20m (US$25.8m) loan facility – had concluded successfully. The company said it should now be able to utilise requisite funds from its working capital facility with Wells Fargo to meet its “immediate funding requirements”.

The news comes just days after Laura Ashley announced its main shareholder, Malaysian investment firm MUI Asia, was in last-ditch talks with Wells Fargo over its future. The company denied claims it would involve a cash injection by MUI Asia; a point it reiterated in its statement today.

It added: “The company welcomes the support from MUI Asia Limited and continues to review its working capital needs on an ongoing basis. The company will update shareholders in due course in relation to the review of its working capital needs.”

In August, Laura Ashley revealed it had swung to a full-year loss, and on Sunday (16 February) the company reported a 10.8% drop in total group sales to GBP109.6m for the 26 weeks ended 31 December as a result of market headwinds and weaker consumer spending.

“We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging,” chairman Andrew Khoo said in Monday’s statement. “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 will enable the business to execute this broad-based strategy.”

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Poulter, former chief operating officer, has taken over as CEO from Kwan Cheong Ng, with immediate effect. She has 25 years of retail experience with companies including Marks and Spencer, Home Retail Group, Kingfisher, Habitat Limited and Wilko Brands.

Georgina Sreeves, associate retail analyst at GlobalData, says Laura Ashley’s GBP20m financing from Wells Fargo gives it a chance of recovery but warns the results reveal “just how much work it will have to do to secure a long term future”. 

“Once a British icon, the brand has since lost its charm and notable styles. In an attempt to re-establish its footing in the ranks of British fashion, Laura Ashley recently announced a collection with British luxury brand, Barbour and collaborations with Urban Outfitters and Rag & Bone which will boost its relevance.

“To supplement its sustainability, which currently is only held up by its use of local suppliers, the brand should consider creating garments out of leftover, unwanted material, just as Laura Ashley did when the brand was founded.