Continental drift dents Laura Ashley

CONTINENTAL Europeans are turning their back on Laura Ashley frocks and curtains, compounding the retailer's problems with stock management and distribution.

The group revealed that it is pondering its future on the Continent after plunging sales there left the group with a £200,000 loss in the six months to 27 July compared with a £2.4m profit in the same period a year earlier.

It seems the Europeans just do not like Laura Ashley's clothes any longer, with the fashion division reporting a 23% fall in like-for-like sales on the Continent in the half-year.

Their appetite for Laura Ashley home furnishings is not much better, and like-for-like sales growth in this division was only 1%.

Trading on the Continent has not improved much since the close of the period. Like-for-like sales there have tumbled 13% in the past eight weeks and Laura Ashley is now planning to franchise its Continental operations.

However, the group's tills were ringing more loudly in Britain and sales of its home furnishings products, popular with the county set, rose 6% on a like-for-like basis. 'This growth has come from a new and expanded product offering, including furniture, lighting and rugs,' it said.

But the group also noted that this changing product mix and increased promotional expenditure had cut margins in this division. There had also been a one-off furniture clearance to aid its move to a new distribution facility.

Laura Ashley's fashion operations in Britain performed better than those on the Continent, though like-for-like sales were still down 3%. During the half-year the group struggled to resolve the stock management issues that have marred its results in the past, blaming an 'over-cautious attitude' to stock for much of the division's poor performance.

'While stock levels in the past six months were below those of the same period last year, we are encouraged by the improved stock turn of our ranges and we are now happy with the level of stock in our stores,' it said. 'We are pleased with the structure of the new design team, but the nature of the business dictates that a true reflection of the importance of their input will not be fully appreciated until the spring collections of 2003.'

Finance director David Cook said the group expected performance in the current half to be 'moderately better' than in the first six months.