Laura Ashley finds a convenient excuse in coronavirus

The fashion and interiors chain will not be the last zombie company to fall victim to Covid-19.

by Stephen Jones
Last Updated: 18 Mar 2020

Coronavirus has its second high-profile corporate victim. 

On Tuesday Laura Ashley announced that it was appointing administrators after the onset of coronavirus had an immediate and significant impact on sales.

Given the circumstances, the COVID-19 pandemic seems like a convenient excuse. 

“Everyone knows that Laura Ashley has been on the precipice for some time before coronavirus,” says Julie Palmer, regional managing partner at insolvency specialist Begbies Traynor.

Like all high street retailers, the fashion and interiors firm has been reeling from the triple whammy of a Brexit-induced slowdown in consumer spend, an increase in business rates and a rise in the minimum wage. 

Laura Ashley has been doubly exposed because its home accessories (35 per cent of the business) and furniture (28 per cent) divisions are particularly reliant on the slowing property market. 

Unlike others that have been able to thrive in retail’s “new normal”, such as Primark, Laura Ashley had low investment and lost touch with its core customer base, allowing sector rivals like IKEA to overtake it. 

The retailer was known for being a favourite from Princess Diana, but in many ways it still feels a lot like it did in those days. One industry analyst remarked to the Guardian that it “looks like it’s selling to a pensioner’s bungalow”.

That culminated in a £14.3m pre-tax loss in 2019, down from a £100,000 profit the previous year. (Pre- tax profits were £6.3m in 2017.) 

In February, chief executive Kwan Cheong Ng resigned after securing a second £20m “lifeline” loan from Malaysian owners MUI Asia and Wells Fargo. His replacement Katherine Poulter was promoted just months after joining the firm from Wilko. 

Bosses had been publicly optimistic that she could deliver a turnaround despite claims that it had weeks left to remain open after Sky News reported it was seeking another £15m cash injection. Coronavirus appears to have dashed those hopes. 

“Like with the collapse of FlyBe, coronavirus is an easy way for people to explain why the business has collapsed - in the same way that we saw business blame Brexit for things that we know that it had nothing to do with,” says Palmer. 

Does it really matter why it’s gone?

Whether it's a convenient excuse or not is a moot point and will be of little comfort to the 2,700 people who have lost their jobs. Laura Ashley is another famous name to add to the pile of high street casualties over the last couple of years, but it’s unlikely to be the last.

Ian Shepherd, former GAME CEO and author of Reinventing Retail, says that the pandemic will continue to affect the high street in multiple ways. 

Shepherd highlights that there were already signs of weakness in consumer demand before the government stepped up its social distancing measures and many retailers have supply chains that extend into affected countries.

“This is only likely to get worse which will put the most financial strain on already struggling retailers most quickly,” he adds.

It remains to be seen whether Rishi Sunak’s bumper £330bn relief package - revealed hours after Laura Ashley’s collapse - will save more firms from going under.

Image credit: Newscast / Contributor via Getty Images

 

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