Data: How can Laura Ashley return to growth?

Laura Ashley warned that its full-year profit would fall below expectations after facing “demanding” trading conditions in its first half. The retailer’s pre-tax profit tumbled 29% to £7.8m in the half to December 31.

This performance has raised question marks over Laura Ashley’s recovery in recent years. Retail Week Prospect looks at how it can return to growth.

Changing the product mix

Laura Ashley’s offer covers furniture, home accessories, decorating and fashion.

Home accessories has been its better-performing category in recent years and was also the only part of the business to achieve like-for-like sales growth in the first half of the year.

The retailer’s underperformance in furniture can be partly attributed to weaker consumer confidence in the UK, but its poor showing in fashion was particularly disappointing after it reviewed the quality, price, style and fit of its clothing offer in its last financial year.

Laura Ashley’s fashion had its heyday in the 1980s, but its design aesthetic is now clearly failing to resonate with consumers.

With trading conditions for big-ticket items expected to remain tough, perhaps it is time for the retailer to drastically increase its focus on home accessories?

Increase international exposure

Despite having a globally recognised brand, Laura Ashley has arguably failed to live up to its international potential.

In the first half of 2016/17, the international business accounted for just 7% of its overall sales.

This low contribution is partly because Laura Ashley trades abroad through licensing and franchise partnerships rather than company-owned stores.

The retailer has already started making moves to capitalise on the favourable climate for British heritage brands.

It started trading in China on the Alibaba-owned Tmall site last year and signed a licensing deal for the Indian market with Future Group.

However, more deals will be needed if the retailer wants to reduce its dependence on the UK market, which is expected to be volatile in the year ahead.

Restore momentum in online

Surprisingly, Laura Ashley already generates a sizeable 20% of its UK retail sales online.

But progress has stalled recently, with online sales growing just 2.4% in the first half.

The ecommerce business was expected to have performed better, especially since Laura Ashley has invested in French and German language sites, and now delivers to eight European countries.

While the planned introduction of localised payment options for Benelux, Germany and France is a step in the right direction, the retailer could do more to boost its online performance.

It could for instance look at enhancing its fulfilment options or its relatively high delivery charges for international customers.

Concessions strategy

As a niche player on the high street, Laura Ashley needs to look beyond its own stores to generate growth.

The retailer has turned to concessions to widen its customer base, most notably through its 22 shop-in-shops in Homebase stores. But these are set to be shuttered this year following Bunnings’ acquisition of Homebase.

Laura Ashley will now need to find other partners to plug this gap. It has already established three concessions in House of Fraser stores in the UK as well as one in its new store in Nanjing, China, but there is no indication if more will be forthcoming.

The retailer could benefit from a wider spread of concession partners.