Laura Ashley’s Malaysian owner has entered talks with a key lender to seek a funding lifeline that would allow the struggling retailer to continue trading.
MUI Asia, which owns the majority of Laura Ashley’s shares, said it is “discussing arrangements” with American bank Wells Fargo. Shares in Laura Ashley crashed as much as 40 per cent in response to the news on Monday.
The homeware and clothing retailer said it would “need to consider all options” if new funding can’t be secured.
Sales fell 11 per cent in the latter half of last year which Laura Ashley blamed on market headwinds and consumers holding off on big purchases. The company issued two profit warnings last year and announced in December 2018 that 40 of its 160 UK stores would close.
MUI agreed a £20m lending facility with Wells Fargo in October but has to meet certain criteria on order to access all of the funds.
“Recent movements in the group’s stock and customer deposit levels have led to a reduction in the amount that the group can draw down under its working capital facility with Wells Fargo,” the company said.
MUI chairman Andrew Khoo, who is the son of MUI Asia’s owner said trading conditions had been challenging.
“There is however a robust plan in place to turn the business around.
“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.”
The latest news will cast further doubt on the retailer’s future as its struggles to deal with online competition, weak consumer demand and high fixed costs such as rent and business rates.
Fashion designer and businesswoman Laura Ashley co-founded the brand with her husband, Bernard Ashley, in 1953.
The first Laura Ashley store opened in South Kensington in 1968 and the brand’s quintessentially British style, with its long floral dresses and soft-coloured tones, went on to define the early 1970s hippie aesthetic.
Since then, Laura Ashley has expanded to selling homeware in its signature floral prints inspired by the English countryside.
But falling demand for its distinctive furniture and decorating products dragged the company a £14.3m in its last financial year.
Mr Khoo has previously outlined plans to expand into the Chinese market.