Number of shops and employees - These figures will determine how much the company has expanded. Its data will be provided by SECOS.
Gearing ratio (%) - This is a ratio which is concerned with the firm’s long-term financial position. The ratio compares the amount of capital raised from outside (depts) with the amount of capital raised from shareholders (equity).
Analysation of Laura Ashley’s performance from 1980.
Early 1980’s
Laura Ashley had total of 80 shops at the end of 1981 and it was planned to expand their stores as they were doing quite well. These few years Laura Ashley experienced a sustained growth in turnover and profits. Amount of shops gradually increased as they had capital available and by 1983 they had 123 shops (Appendices _____ _____).
1984
By the end of this year they had still expanded and planned to expand even further, across North America, Australia, Japan and rest of Europe. This year they had a £66.7 million turnover and a total of 139 shops. They received £4 million in retained profit that year (Appendices _____ _____ _____).
1985 - 1986
These two years where two good years of Laura Ashleys firm money-wise. Retained profit for 1985 and 1986 were £8.8 million respective £11.3 million. Unfortunately Laura Ashley died in an accident at her home in 1985. Her husband continued with the business. They became a PLC and their shares floated onto the public stock exchange market. Its shares reached 243 penc. In 1986 Laura Ashley had 231 shops (Appendices _____ _____ _____).
1987
They had a turnover on £170.9 m and recieved £10 m retained profit. 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. Their costs where too high and it was a bad timing with the state of the economy. Staff cost had reached on about £84 million on 7944 employees and there were too many shops (501). The cost had exeeded their turnover. During this period of time, share prices reached 44 pence! (Appendices _____ _____ _____).
1993 - 1994
Their financial state where on the edge during these two years. Thir retained profit wouldn’t reach £1 million but they where still surviving. Shar prices went slightly up compared to previous year. Laura Ashley made a good move by cutting down on costs such as employees. They had ~4600 employees at this time (Appendices _____ _____ _____).
1995
Ann Iverson became cheif executive, and she started to expand and renovate stores in North America. Cost exeeded again and they lost £31.5 million during this year. Even though they lost that much, their share prices started to rise (Appendices _____ _____ _____).
1996 - 1998
They started to make profit and returns to dividends for the first time on seven years. Ann Iverson thought it would be good to expand again and they overstocked at a cost which lead to a loss of £49.3 millions in 1998 (Appendices _____ _____ _____).
CONCLUSION AND EVALUATION
- Have changes and tastes in fashion been the most important factor affecting Laura Ashley’s performance?
Looking at my analysation and research, I can provide the evidence that this was not the only factor which could have affected Laura Ashleys Performance. It seems that the changes in fashion had some effect on the business during early 1990’s as there are few other factors which could have affected the performance. In the Annual report from Laura Ashley in 1992 it has been written: “our clothes...needs to be improved...as we have to keep up in fashion”. Otherwise I have very weak results to rely my hypothesis on completely.
- Have other factors been important?
Yes. There are many factors which can have affected the performance of Laura Ashley. 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.
