UK retail 'difficult', admits Laura Ashley

THE tough climate on Britain's High Streets shows no signs of abating, Laura Ashley confirmed today as it reported a continued fall in sales and a deteriorating performance in like-for-like trading.

The struggling retailer did, however, post a substantial improvement in profits after vigorous cost cutting across the business and hailed the figure as evidence of its restructuring programme.

Laura Ashley reported pre-tax profits of £4.8m, comfortably ahead of analysts' expectations of £3.6m-£4.2m. Like-for-like trading in the 10 weeks to April 9 showed UK retail sales down 13.9% but the company insisted that this was mainly due to its decision to rejig its fashion offering.

'Our focus for 2005 will continue to be margin improvement and cost management rather than top line sales growth,' chief financial officer David Cook said in a statement. But, he added: 'Retail conditions in the UK remain difficult. Our challenge is to enhance further the product offering in this increasingly competitive marketplace.'

The focus on margins rather than sales growth meant that total sales were down 11.4% over the year to £237.5m. There was success in reducing costs with a drop in overheads of 12% to £96.2m. Margins in the business improved by more than 2%, Cook added.

The company admitted that not all its customers had taken to the changes made in its fashion business. Fashion accounts for almost a quarter (22%) of total UK retail sales. The operation was repositioned as a niche clothing brand, which went down well with franchisees and fashion journalists.

But customers were 'mixed' in their response and sales reacted accordingly. Laura Ashley now expects fashion to decline to about 14% of the group total by early next year although it will remain more significant overseas where it still accounts for about 70% of franchised sales.