Laura Ashley, the fashion and home furnishings group known for its floral prints, issued a profit warning on Thursday after posting a slide in earnings for the first half of its financial year, citing lower sales and the continued effects of a weak pound.
The company said that pre-tax profits had fallen by 45 per cent to £4.3m during the six-month period to the end of December last year, amid trading conditions that were “challenging” and “demanding”.
It described the weak pound as the “most significant single factor” for its lacklustre performance and gave a restrained outlook for the six months ahead. Shares fell sharply on the news.
“Trading conditions have continued to be challenging during the first six months of the year,” said chairman Khoo Kay Peng.
“The board have reviewed the first-half results and forecasts for the remainder of the year to 30 June 2018 and, given the continued market challenges, considers that net pre-tax profit for the year will fall below market expectations.”
The pound has staged a tentative recovery against a slew of global currencies in recent months, but it is still significantly below where it was trading against the US dollar before June 2016’s Brexit referendum.
That slide has translated into a rise in inflation, which has squeezed consumers’ wallets and dealt a blow to retailers – especially those focused on non-essential goods. It has also made it more expensive for companies importing goods and materials into the UK.
Neil Wilson, a senior market analyst at ETX Capital, said that part of the problem might also be that Laura Ashley has struggled to keep up with what shoppers want.
“It’s not really kept pace with changing consumer trends,” he said, adding that it’s also failed to “stay terribly relevant”.
Laura Ashley on Thursday said it was trying to offset those headwinds by cutting costs.
Similar to other high street retailers, the company also said online sales continue to perform well, reflecting a change in consumers’ shopping habits. They rose by 5.1 per cent to £26.9m during the period from £25.6m a year earlier.