Laura Ashley’s stock sank 41.54 per cent today after it warned its access to a £20m funding lifeline to keep it trading was in serious doubt.
The retailer’s owner, Malaysian firm MUI Group, is now locked in discussions with lender Wells Fargo to secure enough cash to keep Laura Ashley trading.
The asset-backed loan, agreed with Wells Fargo in October, is tied to Laura Ashley’s stock and customer deposit levels, the Sunday Times first reported. After those assets dropped, the amount Laura Ashley can access has also fallen.
MUI Group is now seeking to amend those rules to “meet the group’s immediate funding requirements, and to draw down additional amounts to meet ongoing working capital needs”.
“If the group remains unable to access the requisite level of funding, then the company will need to consider all appropriate options,” the retailer warned yesterday.
Laura Ashley has blamed market headwinds for weak home furnishings performance and falling like-for-like sales. It swung to a full-year loss of almost £10m for its 2018-19 financial year.
And shares plunged 26 per cent after the departure of its finance director in October. Chief executive Kwan Cheong Ng also quit after eight years in January as Laura Ashley tries to turn its fortunes around.
But yesterday the retailer warned trading this year “has continued to be challenging”.
Group sales have dropped 10.8 per cent for the second half of 2019. The retailer said market headwinds and “weaker consumer spending” have hurt sales of big-ticket items.
Chairman Andrew Koo said yesterday:
We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging. 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.
The major shareholders have indicated their continued confidence in the business and are fully supportive of the management team and execution of the transformation plan.