LAURA ASHLEY HOLDINGS PLC

CASE
SUMMARY
Laura Ashley Holdings plc (Laura) is a UK based company engaged in the
business of fashion and home furnishings. The company designs,
manufactures, distributes and sells clothing, accessories and home
furnishings. The companys business in the UK has been split into four
categories, namely Home Accessories, Furniture, Decorating and Fashion.
The company has 228 stores in the UK. The company has three principal
store types, namely, mixed product stores which sell all product
categories, 71 home stores which sell the full range of home products and
28 home concession stores. Laura also has 223 franchised stores in 27
countries worldwide.
Global Markets Directs Laura Ashley Holdings plc - Financial Analysis
Review is an in-depth business, financial analysis of Laura Ashley Holdings
plc. The report provides a comprehensive insight into the company,
including business structure and operations, executive biographies and
key competitors. The hallmark of the report is the detailed financial ratios
of the company.

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The report contains critical company information business structure
and operations, the company history, major products and services,
key competitors, key employees and executive biographies,
different locations and important subsidiaries.
The report provides detailed financial ratios for the past five years
as well as interim ratios for the last four quarters.
Financial ratios include profitability, margins and returns, liquidity
and leverage, financial position and efficiency ratios.

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Public Company
Incorporated: 1954
Employees: 2,725
Sales: 276,264,900 ($400 million)(2000)
Stock Exchanges: London
Ticker Symbol: LARAY
NAIC: 6711 Holding Companies; 315232 Womens and Girls Cut and Sew
Blouse and Shirt Manufacturing; 315233 Womens and Girls Cut and Sew
Dress Manufacturing; 315999 Other Apparel Accessories and Other
Apparel Manufacturing; 32551 Paint and Coating Manufacturing.
Laura Ashley Holdings plc is an international designer and retailer of
clothing and home furnishings. Invariably described as quintessentially
English, the Laura Ashley name conjures up images of pretty, romantic
women and rooms draped in tasteful, gracious dresses and soft
furnishings. To financial analysts and shareholders, however, the Laura
Ashley name conjures up another, less pleasing image: that of a company
that, strangely, seems unable to translate its popularity into profits. Laura
Ashley markets a dream of English gentility and elegance, as well as
countryside wholesomeness and purity, which can be purchased in the
urban centres of Britain and around the world. According to the companys
former marketing director, the typical Laura Ashley shopper is romantic,
feminine caring, environmentally aware , family orientated, cultured,
well-travelled and educated. Laura Ashley (North America) is 70 percent
owned by Regent Carolina Corporation, which is 49 percent controlled by
Malaysia United Industries. The other 30 percent is owned by
management officials.

A Family Business Experiences Steady Growth: 195385

I trust my feelings implicitly in my work. I look at fabrics and I need to
feel theyve got life and animation; theyve got to have character to work
for me. Thus Laura Ashleys eponymous founder described the inspiration
for her work. Laura and her husband Bernard started their business in
1953. Working from the kitchen table in their London home, the two used
the hand silk screen method to print textiles. Laura designed small items
such as linen napkins and tablemats, and Bernards specialty was
furnishing prints. Design inspiration came from many sources, particularly
nature and 19th-century prints by artists such as William Morris.
So favourable was the initial reaction to the Ashleys work that within a
year they had formed a private limited company and hired more

employees. Laura Ashley products were sold in London in the stores John
Lewis, Heals, and Libertys, and almost from the beginning, were shipped
to Paris, Amsterdam, the United States, and Australia. Operations
continued to grow, and by 1957, when the first Laura Ashley showroom
was opened in Londons Burlington Street, domestic and overseas
customers numbered about 500.
In 1961, the company introduced its first item of apparel-gardening
overallsand within five years clothing accounted for a significant
proportion of Laura Ashleys revenues. An-other, larger London showroom
was opened in 1966, and two years later the first Laura Ashley shop
debuted, in Pelham Street, Kensington, London. A year later, a second
shop opened, in Fulham Road, London, and it became apparent that the
company was moving from being a design-based business to become a
retailer in its own right. From this juncture, the company grew very
quickly, with profits recycled back into research, design, more factories,
and a rapidly increasingly number of Laura Ashley outlets.
Along with domestic expansion came overseas growth: the first foreign
shop opened in Geneva in 1972, followed two years later by stores in
Paris, Dusseldorf, and San Francisco. Success followed success, and it
seemed that the global appeal of Laura Ashleys pretty floral designs
would result in a retail empire.

The Move to Become an International Retail Chain:

198592
Then in 1985, with 30 years of steady, solid success to their credit, and
every expectation that expansion would continue, Laura and Bernard
Ashley decided to float the company on the stock market. Sadly, Laura
died in an accident just weeks before the flotation. The validity of the
somewhat melodramatic conclusion later reached by the Sunday Times
with her death, the company lost its essenceis arguable, but it is
certainly true that the new plc was soon engulfed in severe difficulties.
The flotation itself was an undeniable triumph, with shares oversubscribed
34 times. Yet only five years later, in 1990, the company had plummeted
sharply into the red and was at serious risk of a takeover bid. What had
gone wrong? Part of the trouble arose from the general economic situation
many British companies suffered in the economic recession of the late
1980s and part from the prevailing fashions of the times: Laura Ashleys
trademark of graceful, floral, feminine apparel was at odds with the vogue
for sharp-suited power dressing.
Probably much more damaging than the recession or contrary fashion
trends, however, was what the Independent on Sunday under stately
labelled Laura Ashleys rather naive management. Flush with success
and plenty of capital after the flotation, Laura Ashley plunged into

enthusiastic expansion. By 1987, the company was operating in 13

different countries but not operating all that well in most of them. The
companys performance in the North American market was particularly
troubled, bedevilled as it was by an unnecessarily complicated, top-heavy
structure, excessive overhead and inventory costs, and an inadequate
allocation and distribution system that was exacerbated by deficient
communications methods.
Laura Ashleys management team appeared to have little control over a
decentralized, haphazard, and inefficient corporate structure. Further,
rather than reining back when it began to find itself in financial trouble,
the company spent even more; borrowing reached unmanageable
proportions, and profits first dwindled, then disappeared. Perhaps the
Economist described it best: For decades Laura Ashley made money by
selling a vision of Englishness: flowing, flowery frocks and furnishing
fabrics in polite, pastel tones. But it also came to indulge in a very English
failingmismanaging the transition from a successful family business to
an international retail chain. In 1990, Laura Ashley posted a loss of 11.5
million and was saved only by the intervention of the Japanese retailer
Aeon, whose welcome infusion of cash, in exchange for a 15 percent
stake, bailed the company out.

A Series of Management Teams: 199299

For 13 months during this crucial time, to the amazement of financial
analysts, the company operated without a chief executive. Finally in 1991,
an American manager, Jim Maxmin, was brought to the position. Maxmin,
who later stated starkly that the company had been heinously
mismanaged, embarked on a program of cutbacks, reorganization, and
realignment. Believing that Laura Ashleys real strength lay in its quality
as a brand, rather than its status as a retailer, Maxmin sought to
concentrate on the companys strengthscreating popular designs in
clothing and furnishingsand to extricate it from those activities in which
its record was less favourable. To this end, he contracted out most
manufacturing and distribution operations. The latter was achieved via an
alliance with Federal Express, in a move to reduce expensive inventories
and improve stock movement (a perennial problem area for Laura Ashley,
which had on one occasion shipped its winter stock to the United States
two months late). Staffing levels were cut and managers were encouraged
to take a more hands-on approach to retailing operations. They were
required, for instance, to periodically visit shop floors and endure stints on
the customer complaint line. Maxmins strategies were successful, and
Laura Ashley worked its way back to a slight profit in 199293 after
several years of losses. Recovery continued steadily, though it was slowed
by lingering difficulties in the American market.

It came as something as a surprise, then, when it was announced in 1994

that Maxmin was to leave the company after a boardroom disagreement
over investment levels. No further explanation was forthcoming, and no
new chief executive was actively sought to replace Maxmin. He left with a
compensation package of 1.8 million in a year when the companys
entire profits totalled 3 million.

Key Dates:
1953: Laura Ashley and her husband Bernard start their business in their
kitchen.
1957: The first Laura Ashley showroom opens in Londons Burlington
Street.
1972: Laura Ashley begins international operations.
1985: Laura Ashley dies weeks before the companys first stock flotation.
1991: Jim Maxmin becomes chief executive officer.
1994: Maxmin resigns.
1995: Ann Iverson becomes chief executive officer.
1997: The board dismisses Iverson and names David Hoare chief
executive officer.
1998: The board appoints Victoria Egan chief executive officer and Michael
Appel chief executive for its North American operations; the company sells
Laura Ashley Japan; Malayan United Industries purchases 40 percent of
Laura Ashleys stock.
1999: Ng Kwan Cheong becomes chief executive officer; MUI management
purchases Laura Ashley North America.
After Maxmins departure, Laura Ashley continued its course of
rationalization. Laura Ashley, commented The Times, still retained an
absurdly large infrastructure plagued with over manning. Further jobs
were cut, particularly in senior management and administration, in which
employee numbers were slashed by a quarter. From 1990 to 1995 some
1,500 jobs were eliminated and six factories closed. Non-core products
were axed from the Laura Ashley line, and renewed efforts were made to
reduce overheads. The head offices in North America and Europe were
pared down, bringing them under the jurisdiction of the U.K. head office.
In the United States, the company closed down some stores and
amalgamated others, and the firm began pulling out of Australia
completely. The company also focused on improving its information
systems to help alleviate the self-confessed dysfunction and confusion
which has inhibited our past development and held back profitability.
Most significantly, Laura Ashley continued to concentrate on its strengths:

creative design, a popular brand, a readily identifiable and appreciated

image. Still, the company experienced losses in 1990, 1991, and 1992.
Laura Ashley remained an irony of British business. The quality and
desirability of the product it sold were notand never had beenin doubt.
Promoted as a lifestyle brand, Laura Ashley scored consistently high in
terms of customer recognition and appreciation. Life, as Laura Ashleys
lyrical annual report noted, is often an assault on the mind. Laura Ashley
aimed to soften the blow for its customers by offering products that are
unselfconsciously graceful and soothing and evoke a timeless mood of
peace and serenity. Somehow, though, while Laura Ashleys creative
philosophy might have been popular globally, the companys bottom line
remained strangely depressing: on a 1994 turnover figure of 300 million,
Laura Ashleys profits were a disappointing 3 million. By 1995, the
company was in the red for 31 million.
In June 1995, the company once again determined to get on the right
track when it hired Ann Iverson, who arrived from Mother Care, a company
that she had successfully turned around. Iverson, who had also been the
chief executive of Kay-Bee Toys in the United States, led the company into
a four-year restructuring and recovery program aimed at trimming sales
outlets in North America, curtailing operations in England and the
Netherlands, and centralizing marketing and finance at its world
headquarters. The company cut 200 jobs, half of them in Britain, 50 at its
U.S. headquarters, and 50 at its European head office in the Netherlands.
It simultaneously made its manufacturing operations into a stand-alone
business.
Within ten months, Iverson had restored dividend payments for the first
time since 1989. By 1996, the company was back in the black as Iverson
announced an ambitious expansion program aimed at overhauling the
companys image and changing its marketing strategy. Iverson closed 40
of the 200 outlets in the United States and in their place opened ten larger
stores that sold home furnishings as well as womens and childrens
apparel. Laura Ashley introduced new designs that used new colours,
softer fabrics, and lighter patterns.
Seven months later, the difficulty of transforming the groups fortunes hit
home. Management had overestimated the strength of the brand in the
United States and did not have the resources in place to back up the
expansion with marketing and promotions. The stock ordered to fill the
new, larger stores instead filled warehouses. The company froze its
operating program in the United States while belatedly introducing a 2
million advertising campaign to support its expansion. Things worsened in
May 1997 when the companys director of merchandise and finance
director resigned a month after Laura Ashley warned that its 1998 profit
would not meet expectations because supplies of unsold merchandise
would force it to cut prices.

That same month, at the companys annual shareholder meeting, some

were calling Iversons management style into question. Despite her ability
to articulate strategy in down-to-earth language, according to a 1997
Financial Times article, Britains highest paid businesswoman had shocked
colleagues by publicly chastising an employee and was preoccupied with
details normally left to individual department managers. In addition, she
had chosen an unorthodox recovery team that included a city analyst in
charge of merchandising. Iverson herself recognized that problems were
still afoot at the company at that meeting, when she announced amid
news of a sales slowdown that, We will get a few things wrong, but we
will get many more things right.
By July 1997, however, shares of the company were at their lowest in
more than six years and Iversons design director also had resigned. The
company hired outside consultants to help it rediscover its
distinctiveness in August, while analysts were beginning to attribute the
failure of Iversons strategy to bad recruitment, bad merchandising, and
over-aggressive expansion. The board of directors also hired David Hoare,
a management consultant turned venture capitalist, as chief operating
officer and assigned him the responsibility of day-to-day purchasing,
distribution, and stock control. Hoare was described by colleagues as a
man who erred on the side of caution. In November, the board, led by Sir
Ashley, dismissed Iverson and named Hoare chief executive officer. In
January 1998, it named a new chief executive for its North American
operations, Michael Appel, a former merchandising director for
Bloomingdales, and posted losses of 25.5 million.
During Hoares brief tenure as chief executive, he halted Iversons
aggressive expansion program and began plans to sell the companys four
factories in Wales and one in the Nether-lands. In March 1998, the
company sold Laura Ashley Japan, which had continued to earn profits, to
Jusco, while still maintaining a 27 percent share of the company. In April
1998, Malayan United Industries (MUI), which ran the Malaysia
department store chain, Metrojaya Bhd, entered into an agreement to
purchase 40 percent of Laura Ashley. In return for its purchase, MUI
appointed four new board directors. Sir Bernard Ashley left the board,
replaced by his son, in June 1998.
Victoria Egan, the former head of an MUI Group mall in the Philippines,
took over as chief executive of Laura Ashley in August 1998. Under her
administration, the company restructured, devolving much of its
administration to three headquartersone in Europe, one in North
America, and a third in east Asiaand closed ten of the 30 larger North
American stores. Egans tenure was even briefer than Hoares; in January
1999, she was replaced by Ng Kwan Cheong, an executive of MUI.

When the companys bankers threatened to end their financial support if

Laura Ashley did not shed its North American operations, MUI stepped in
again. This time, the companys North American management bought the
100 U.S.-based stores, headquarters, and warehouse for $1 and agreed to
write off their $34.4 million debt in April 1999. Laura Ashley North America
had lost $64 million in 1997 and 1998. The new Laura Ashley, Inc.,
headquartered in Boston, began remodelling almost immediately to turn
its large stores into intimate boutiques. As part of its strategy, the
company began to beef up its brand-licensing program in home
furnishings and planned to increase this category of products from 45 to
60 percent.
After disposing of its North American franchise, Laura Ashley Holdings
raised 25 million in a rights issue that enabled it to eliminate its bank
borrowings. Ng Kwan Cheong then led the company to restructure its
product and price range and to carry out a study on customer
expectations. Examining the companys supply chain, he expanded its
number of suppliers. Looking at advertising, he branched out from
promotional to brand advertising. By the end of 1999, Laura Ashley had
posted a solid rise in sales and gross margins over the Christmas period.
In 2000, the group expanded its home furnishings units in many of its
stores and began plans to open additional stores in France and Germany
and to develop an online shopping facility.

Principal Subsidiaries
Laura Ashley Ltd.; Laura Ashley Investments Ltd.; Laura Ashley B.V.
(Netherlands); Laura Ashley Manufacturing B.V. (Netherlands); Laura
Ashley Distribution B.V. (Netherlands); Laura Ashley Investments B.V.
(Netherlands); Laura Ashley Trading B.V. (Netherlands); Laura Ashley N.V.
(Belgium); Laura Ashley Gmbh (Germany); Laura Ashley Gmbh (Austria);
Laura Ashley Sri (Italy); Laura Ashley Espana S.A. (Spain); Laura Ashley
Shops Ltd. (Ireland); Laura Ashley Shops Ltd. (Canada); Laura Ashley, Inc.
(United States).

Principal Competitors
Next plc; Oasis; Guccio Gucci SpA; Polo/Ralph Lauren Corpo-ration; Chanel
S.A.; Debenhams plc; Marks and Spencer plc.