What factors have affected Laura Ashley's growth/contraction and its profitability since 1980?
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What Factors Have Affected Laura Ashley's Growth/Contraction And Its Profitability Since 1980? INTRODUCTION Hypothesis: Laura Ashleys performance have been affected mostly by change in fashion. To prove my hypothesis I will start to investigate this further through researching documentation and accounts from Laura Ashley starting from 1980. To be able to prove that Laura Ashley's performance have mostly been affected through change in fashion, I will read and provide evidence from Laura Ashleys Annual Company Reports and other media sources. I will also look out for any other factors which could have affected Laura Ashleys performance. The sources for this investigation will have to be Laura Ashleys Profit and Loss accounts, balance sheets and other financial or economical information. Laura Ashleys performance can be measured in many different ways. The method I will be using to measure their performance is through analysing figures including: * Share price * Growth in turnover * Profit and losses * Number of shops and employees * Gearing ratio (%) Share price - The price of each share, which is bought by shareholder. Shareholders basically contribute money to a business, which stays in the business as long as it exists. As Laura Ashley became a plc (public limited company) since end of 1985, their share prices have been bought and sold on the public stockexchange.
The share price had reached 213 pence (slightly fallen). Laura Asley now had 296 shops and 5749 employees. Consequently by mid 80's the ratio of external dept to shareholders (gearing ratio) increased substansially to over 100% by 1987 (Appendices _____ _____ _____). 1988 - 1989 The firm recieved about £8-10 million retained profit and still kept on expanding. Their costs were very high and this was not good, as Late 1980's conditions in the British economy changed. Britain was preparing to enter the European Exchange Rate Mechanism (ERM), and the conservative government wanted to do this at a relatively high exchange rate in order to keep down the price of imports and dampen down inflation tendencies. The only way £ sterling could be kept at a high value in relation to the Deutchmark , however, was to maintain high interest rates. These were required in order to maintain a net inflow of capital from abroad and so to strengthen demand for the £ in foreign exchange markets (the current balance of payment waws in substansial deficit during this period). Laura Ashley had 439 shops and 7424 employees at the end of 1989 (Appendices _____ _____ _____). 1990 - 1992 Laura Lashley made a £26.6 million loss durin 3 years.
I can conclude by looking at the pattern of the rate of expansion to amont of retained profit that during the period of 1989-1992, Laura Ashley Expanded very rapidly instead of keeping the business steady. During late 1980's when the state of the economy was poor and interest rates were high, Laura Ashley made a large loss. Instead of trying to survive, it tried to grow. As it was stated in an article in The Express "they tried to make the company run before it could even walk". The firm needed to slow down and not overstock too much as it did. They had cashflow problems. Maybe they needed to take care of their accounts properly. All these factors have been important but at different periods of time. The change in fashion affected the business during early 1990's and the poor stat of the economy affected the firm at the late 1980's. Laura Ashley changed many chief executives and that is also a factor which could have affected the business. Over all my research was done through secondary sources of data. Unfortunately, because the lack of time I did not have time to do some primary research such as interviewing people in the company etc. My appendix is based upon newspaper extracts and SECOS data. I also should have refered more to my appendix during my report. BEC Project 2: "Laura Ashley" Page 1 of 4
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