Laura Ashley has warned profits will fall short of City forecasts after taking a hit from the weak pound and slumping demand for furniture and wallpaper in the UK.
The home furnishings and womenswear firm, known for its floral prints, reported a steep drop in pretax profits to £4.3m in its first half to 31 December from £7.8m a year earlier. It warned full-year profits would miss market expectations of £9m and ditched its interim dividend. Last year it made a profit of £8.4m.
The shares plunged 18% in early trading and were later flat at 6p, giving the firm a market value of £44m.
Seán Anglim, Laura Ashley’s finance director, talked of an “overall toughening of the market” with like-for-like sales declines of 4.4% in furniture and 3.9% in decorating products such as fabrics, curtains and wallpaper.
This was partially offset by 4% growth in home accessories including lights, bed linen and rugs and a 1.2% rise in fashion sales. Clothing makes up 17% of the business.
The company pointed to the decline in the pound as the most significant single factor behind the fall in profits. It has also been hit by the closure of 22 Homebase stores which had Laura Ashley concessions.
Other furniture retailers are also struggling, as the housing market has almost ground to a halt. Bedmaker Warren Evans has just gone into administration and will close if a buyer cannot be found. Another furniture maker, Multiyork, filed for administration in November.
Laura Ashley has 161 stores in the UK and has ventured into hotels and tearooms. It owns a hotel in Elstree and has licensed its brand to the Belsfield Hotel in the Lake District.
Following the successful opening of a Laura Ashley tea room in Solihull, the firm wants to license the hotel and tea room brands in the UK and abroad.
The firm is controlled by Malaysia’s MUI Group, which owns 35% of the shares, with a further 25% owned by the chairman, Dr Khoo Kay Peng.