Shares in Laura Ashley slumped by 60% today (17 March) after it confirmed plans to appoint administrators to take over the business.
The struggling clothing and homewares retailer blamed the coronavirus outbreak for an “immediate and significant impact on trading,” adding it had offset a 24% year-on-year improvement in business performance for the seven weeks to 13 March.
It said ongoing developments indicate the outbreak will be a “sustained national situation.”
“Following discussions with stakeholders, a revised cash flow forecast and the increased uncertainty facing the group, it believes it will not be in a position to draw down additional funds from third-party lenders in a timely manner sufficient to support working capital requirements,” it said, adding its largest shareholder, MUI Asia, could not provide financial support in the required timeframe.
“The directors of the company, its key trading subsidiary (Laura Ashley Limited), Premier Home Logistics Limited, Laura Ashley Investments Limited, and Texplan Manufacturing Limited, have concluded that all available alternative options have been explored and therefore, in order to protect creditors, it is necessary to file a notice of intention to appoint administrators in respect of the company and each of the named subsidiaries.”
Robert Lewis and Zelf Hussain have been appointed as administrators.
The retailer has been struggling with falling sales and declining profits for some time now. In August it swung to a full-year loss, and last month reported a 10.8% drop in total group sales to GBP109.6m for the 26 weeks to 31 December blaming market headwinds and weaker consumer spending.
Commenting on the announcement, Salman Haqqi, personal finance expert at money.co.uk, says: “It’s sad but not surprising news, as we know they are one of the many household high street brands that have struggled to make ends meet in the current retail climate.
“Clearly Covid-19 has had a role to play here too, with potential customers worried about going out and doing non-essential shopping – the fashion and homeware chain has even said it has filed for administration after rescue talks were thwarted by the coronavirus pandemic.”
Amy Higginbotham, retail analyst at GlobalData, adds: “Laura Ashley blames recent poor trading (at least in part) to the Covid-19 outbreak, and though this has no doubt had a significant impact on its performance over the past week or so, the retailer has been struggling for a while. The brand has long been tired and has struggled to regain relevance in both its fashion and home divisions.
“Financially weak retailers, of which there are many, are likely to follow Laura Ashley into administration given the current crisis. Those retailing non-essential purchases that can easily be deferred will be particularly badly hit.”