A last chance for Laura Ashley

Laura Ashley, once the epitome of successful English fashion, is being given a final chance by a Malaysian conglomerate.

Last week, the company unveiled the $1 disposal of its loss-making North American stores and a $25m (pounds 16m) rights issue. Without these actions, the company's bank facilities would have expired on Friday and it would have been insolvent.

Both the sale and rights issue depend on MUI, the Malaysian stockbroking, concrete and chocolate company. It invested pounds 45m in Laura Ashley last year and is now both underwriting the rights issue and supporting the management buy-out of the North American business. Its stake in Laura Ashley could rise from 40 per cent to 60 per cent.

In January, Kwan Cheong Ng of MUI became Laura Ashley's seventh chief executive this decade. He said last week: "We can now direct our focus on improving profitability in the UK and continental Europe and on expanding our successful franchising and licensing businesses worldwide."

This must be the last chance for one of Britain's most famous brands, but the company is confident it has a good foundation to build on.

"The brand is very strong on a worldwide stage. There are not so many that shoppers know unprompted around the world," said Stephen Cox, its company secretary.

Created at a kitchen table during the 1950s, Laura Ashley became the source of the English floral frock during the 1970s and 1980s. It offered that rare thing, an English style admired overseas. Launching its first overseas shop in Geneva, the company built up a chain of boutique-style outlets on the Continent, in the Far East and on America's East Coast. The untimely death of Laura Ashley just before flotation in 1985 probably caused the company to lose a sense of its own style.

Whether her presence would have improved management must be an open question but it could hardly have been worse. Managers came and went at an alarming rate. The company was slow to transfer production from high-cost factories in Wales. There were repeated spats between the company's co-founder Bernard Ashley and successive chief executives. The design of the merchandise left much to be desired. For a time, the floral prints were dropped, but then returned. And the quality deteriorated.

"It has the most appalling management record," said one analyst, who asked not to be named. "The management lost sight of where the brand is positioned. It is a niche brand for affluent middle-aged women. You had generations of women buying the stuff. They got it all wrong when they decided to broaden the appeal and reduced the quality of the products."

The greatest expansion of the brand came under Ann Iverson, appointed in July 1995. Iverson hit the headlines because of her million-pound pay- packet and a revealing shoot in a leather dress for Vogue. She also talked the language of the City, which thought it was about to see the brand revive under a good chief executive with retail experience.

"She gave good presentations. But there was nothing behind it. It was all hype," another analyst said. Mrs Iverson had spent 30 years in retailing and had achieved some success at Mothercare, where she was believed to have turned round the once-dowdy chain. Thrice-married, Iverson also had a reputation for tough talking that was well-founded. To revive Laura Ashley, Iverson launched an ambitious expansion scheme in North America. She opened 30 larger stores, displaying Laura Ashley's full range in the major shopping malls and using antique furniture to underline the old-fashioned image. Even Des Moines, Iowa, in the heart of the Midwest, benefited from a Laura Ashley branch offering English wallpaper and floral designs.

But Americans were becoming disillusioned with frilly dresses. "They were very high quality, very well made. But they were high maintenance. Even those beautiful cottons needed to be ironed," said Margie Johnson of Shop Talk, a US retail consulting firm.

Profits rose sharply to pounds 16m in 1997, but this initial success was not sustained. Iverson pressed the stores to take stock but they merely started to groan under unsold items. Losses soared. Iverson was forced to leave just two years after joining the company, taking a pounds 450,000 pay-off.

Her legacy has been daunting. The 32 large stores in America were largely responsible for the company's losses during the last two years. Despite an unprecedented consumer boom, Laura Ashley contrived to lose pounds 14m in America last year. To sell the American stores, $34m in inter-company debt had to be written off. However, the company believes it is now soundly based financially.

The crucial challenge is to start making profits from the remaining Laura Ashley stores - there are 300 shops in Britain and the Continent, with 200 franchised and licensed stores in the rest of the world. In Japan, not a place one might associate with English floral prints, there are 66 Laura Ashley outlets.

A new advertising agency has been appointed and a pounds 2.5m store refurbishment programme is starting in Britain.

But the indications are not good. The British high street is tough and current trading is dire. Overall, Laura Ashley's clothes sales declined by a fifth last year. During the first 11 weeks of the current year, the garments business suffered a 15 per cent drop in sales.

For the moment the future of the company must be uncertain. Richard Hyman of Verdict Research, the retail consultancy, described Laura Ashley as "a business that has been neglected and abused." He thinks there is "no natural constituency" for the company in Britain. Perhaps it is impossible to sell Englishness.