Laura Ashley Holdings plc History

Address:

The Chambers, 3rd floor
Chelsea Harbor
London SW10OXF
United Kingdom

Telephone: 44-20-7880-5100
Fax: 44-20-7880-5200

Public Company
Incorporated:1954
Employees: 2,725
Sales: £276,264,900 ($400 million)(2000)
Stock Exchanges: London
Ticker Symbol: LARAY
NAIC:6711 Holding Companies; 315232 Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing; 315233 Women's and Girls' Cut and Sew Dress Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing; 32551 Paint and Coating Manufacturing

Key Dates:

1953:: Laura Ashley and her husband Bernard start their business in their kitchen.
1957:: The first Laura Ashley showroom opens in London's Burlington Street.
1972:: Laura Ashley begins international operations.
1985:: Laura Ashley dies weeks before the company's first stock flotation.
1991:: Jim Maxmin becomes chief executive officer.
1994:: Maxmin resigns.
1995:: Ann Iverson becomes chief executive officer.
1997:: The board dismisses Iverson and names David Hoare chief executive officer.
1998:: The board appoints Victoria Egan chief executive officer and Michael Appel chief executive for its North American operations; the company sells Laura Ashley Japan; Malayan United Industries purchases 40 percent of Laura Ashley's stock.
1999:: Ng Kwan Cheong becomes chief executive officer; MUI management purchases Laura Ashley North America.

Company History:

Laura Ashley Holdings plc is an international designer and retailer of clothing and home furnishings. Invariably described as 'quintessentially English,' the Laura Ashley name conjures up images of pretty, romantic women and rooms draped in tasteful, gracious dresses and soft furnishings. To financial analysts and shareholders, however, the Laura Ashley name conjures up another, less pleasing image: that of a company that, strangely, seems unable to translate its popularity into profits. Laura Ashley markets a dream of English gentility and elegance, as well as countryside wholesomeness and purity, which can be purchased in the urban centers of Britain and around the world. According to the company's former marketing director, the typical Laura Ashley shopper is 'romantic, feminine ... caring, environmentally aware ..., family orientated, cultured, well-traveled and educated.' Laura Ashley (North America) is 70 percent owned by Regent Carolina Corporation, which is 49 percent controlled by Malaysia United Industries. The other 30 percent is owned by management officials.

A Family Business Experiences Steady Growth: 1953--85

'I trust my feelings implicitly in my work. I look at fabrics and I need to feel they've got life and animation; they've got to have character to work for me.' Thus Laura Ashley's eponymous founder described the inspiration for her work. Laura and her husband Bernard started their business in 1953. Working from the kitchen table in their London home, the two used the hand silk screen method to print textiles. Laura designed small items such as linen napkins and tablemats, and Bernard's specialty was furnishing prints. Design inspiration came from many sources, particularly nature and 19th-century prints by artists such as William Morris.

So favorable was the initial reaction to the Ashleys' work that within a year they had formed a private limited company and hired more employees. Laura Ashley products were sold in London in the stores John Lewis, Heal's, and Liberty's, and almost from the beginning, were shipped to Paris, Amsterdam, the United States, and Australia. Operations continued to grow, and by 1957, when the first Laura Ashley showroom was opened in London's Burlington Street, domestic and overseas customers numbered about 500.

In 1961, the company introduced its first item of apparel--gardening overalls--and within five years clothing accounted for a significant proportion of Laura Ashley's revenues. Another, larger London showroom was opened in 1966, and two years later the first Laura Ashley shop debuted, in Pelham Street, Kensington, London. A year later, a second shop opened, in Fulham Road, London, and it became apparent that the company was moving from being a design-based business to become a retailer in its own right. From this juncture, the company grew very quickly, with profits recycled back into research, design, more factories, and a rapidly increasingly number of Laura Ashley outlets.

Along with domestic expansion came overseas growth: the first foreign shop opened in Geneva in 1972, followed two years later by stores in Paris, Dusseldorf, and San Francisco. Success followed success, and it seemed that the global appeal of Laura Ashley's pretty floral designs would result in a retail empire.

The Move to Become an International Retail Chain: 1985--92

Then in 1985, with 30 years of steady, solid success to their credit, and every expectation that expansion would continue, Laura and Bernard Ashley decided to float the company on the stock market. Sadly, Laura died in an accident just weeks before the flotation. The validity of the somewhat melodramatic conclusion later reached by the Sunday Times--'with her death, the company lost its essence'--is arguable, but it is certainly true that the new plc was soon engulfed in severe difficulties.

The flotation itself was an undeniable triumph, with shares oversubscribed 34 times. Yet only five years later, in 1990, the company had plummeted sharply into the red and was at serious risk of a takeover bid. What had gone wrong? Part of the trouble arose from the general economic situation--many British companies suffered in the economic recession of the late 1980s--and part from the prevailing fashions of the times: Laura Ashley's trademark of graceful, floral, feminine apparel was at odds with the vogue for sharp-suited power dressing.

Probably much more damaging than the recession or contrary fashion trends, however, was what the Independent on Sunday understatedly labeled Laura Ashley's 'rather naive management.' Flushed with success and plenty of capital after the flotation, Laura Ashley plunged into enthusiastic expansion. By 1987, the company was operating in 13 different countries but not operating all that well in most of them. The company's performance in the North American market was particularly troubled, bedeviled as it was by an unnecessarily complicated, top-heavy structure, excessive overhead and inventory costs, and an inadequate allocation and distribution system that was exacerbated by deficient communications methods.

Laura Ashley's management team appeared to have little control over a decentralized, haphazard, and inefficient corporate structure. Further, rather than reining back when it began to find itself in financial trouble, the company spent even more; borrowing reached unmanageable proportions, and profits first dwindled, then disappeared. Perhaps the Economist described it best: 'For decades Laura Ashley made money by selling a vision of Englishness: flowing, flowery frocks and furnishing fabrics in polite, pastel tones. But it also came to indulge in a very English failing--mismanaging the transition from a successful family business to an international retail chain.' In 1990, Laura Ashley posted a loss of £11.5 million and was saved only by the intervention of the Japanese retailer Aeon, whose welcome infusion of cash, in exchange for a 15 percent stake, bailed the company out.

A Series of Management Teams: 1992--99

For 13 months during this crucial time, to the amazement of financial analysts, the company operated without a chief executive. Finally in 1991, an American manager, Jim Maxmin, was brought to the position. Maxmin, who later stated starkly that the company had been 'heinously mismanaged,' embarked on a program of cutbacks, reorganization, and realignment. Believing that Laura Ashley's real strength lay in its quality as a brand, rather than its status as a retailer, Maxmin sought to concentrate on the company's strengths--creating popular designs in clothing and furnishings--and to extricate it from those activities in which its record was less favorable. To this end, he contracted out most manufacturing and distribution operations. The latter was achieved via an alliance with Federal Express, in a move to reduce expensive inventories and improve stock movement (a perennial problem area for Laura Ashley, which had on one occasion shipped its winter stock to the United States two months late.) Staffing levels were cut and managers were encouraged to take a more hands-on approach to retailing operations. They were required, for instance, to periodically visit shop floors and endure stints on the customer complaint line. Maxmin's strategies were successful, and Laura Ashley worked its way back to a slight profit in 1992--93 after several years of losses. Recovery continued steadily, though it was slowed by lingering difficulties in the American market.

It came as something as a surprise, then, when it was announced in 1994 that Maxmin was to leave the company after a boardroom 'disagreement over investment levels.' No further explanation was forthcoming, and no new chief executive was actively sought to replace Maxmin. He left with a compensation package of £1.8 million in a year when the company's entire profits totaled £3 million.

After Maxmin's departure, Laura Ashley continued its course of rationalization. Laura Ashley, commented The Times, still retained 'an absurdly large infrastructure plagued with overmanning.' Further jobs were cut, particularly in senior management and administration, in which employee numbers were slashed by a quarter. From 1990 to 1995 some 1,500 jobs were eliminated and six factories closed. 'Non-core' products were axed from the Laura Ashley line, and renewed efforts were made to reduce overheads. The head offices in North America and Europe were pared down, bringing them under the jurisdiction of the U.K. head office. In the United States, the company closed down some stores and amalgamated others, and the firm began pulling out of Australia completely. The company also focused on improving its information systems to help alleviate the self-confessed 'dysfunction and confusion which has inhibited our past development and held back profitability.' Most significantly, Laura Ashley continued to concentrate on its strengths: creative design, a popular brand, a readily identifiable and appreciated image. Still, the company experienced losses in 1990, 1991, and 1992.

Laura Ashley remained an irony of British business. The quality and desirability of the product it sold were not--and never had been--in doubt. Promoted as a 'lifestyle' brand, Laura Ashley scored consistently high in terms of customer recognition and appreciation. 'Life,' as Laura Ashley's lyrical annual report noted, 'is often an assault on the mind.' Laura Ashley aimed to soften the blow for its customers by offering products that are 'unselfconsciously graceful and soothing' and evoke 'a timeless mood of peace and serenity.' Somehow, though, while Laura Ashley's creative philosophy might have been popular globally, the company's bottom line remained strangely depressing: on a 1994 turnover figure of £300 million, Laura Ashley's profits were a disappointing £3 million. By 1995, the company was in the red for £31 million.

In June 1995, the company once again determined to get on the right track when it hired Ann Iverson, who arrived from Mothercare, a company that she had successfully turned around. Iverson, who had also been the chief executive of Kay-Bee Toys in the United States, led the company into a four-year restructuring and recovery program aimed at trimming sales outlets in North America, curtailing operations in England and the Netherlands, and centralizing marketing and finance at its world headquarters. The company cut 200 jobs, half of them in Britain, 50 at its U.S. headquarters, and 50 at its European head office in the Netherlands. It simultaneously made its manufacturing operations into a stand-alone business.

Within ten months, Iverson had restored dividend payments for the first time since 1989. By 1996, the company was back in the black as Iverson announced an ambitious expansion program aimed at overhauling the company's image and changing its marketing strategy. Iverson closed 40 of the 200 outlets in the United States and in their place opened ten larger stores that sold home furnishings as well as women's and children's apparel. Laura Ashley introduced new designs that used new colors, softer fabrics, and lighter patterns.

Seven months later, the difficulty of transforming the group's fortunes hit home. Management had overestimated the strength of the brand in the United States and did not have the resources in place to back up the expansion with marketing and promotions. The stock ordered to fill the new, larger stores instead filled warehouses. The company froze its operating program in the United States while belatedly introducing a £2 million advertising campaign to support its expansion. Things worsened in May 1997 when the company's director of merchandise and finance director resigned a month after Laura Ashley warned that its 1998 profit would not meet expectations because supplies of unsold merchandise would force it to cut prices.

That same month, at the company's annual shareholder meeting, some were calling Iverson's management style into question. Despite her ability to articulate strategy in down-to-earth language, according to a 1997 Financial Times article, Britain's highest paid businesswoman had shocked colleagues by publicly chastising an employee and was preoccupied with details normally left to individual department managers. In addition, she had chosen an unorthodox recovery team that included a city analyst in charge of merchandising. Iverson herself recognized that problems were still afoot at the company at that meeting, when she announced amid news of a sales slowdown that, 'We will get a few things wrong, but we will get many more things right.'

By July 1997, however, shares of the company were at their lowest in more than six years and Iverson's design director also had resigned. The company hired outside consultants to help it 'rediscover its distinctiveness' in August, while analysts were beginning to attribute the failure of Iverson's strategy to bad recruitment, bad merchandising, and over-aggressive expansion. The board of directors also hired David Hoare, a management consultant turned venture capitalist, as chief operating officer and assigned him the responsibility of day-to-day purchasing, distribution, and stock control. Hoare was described by colleagues as a man who erred on the side of caution. In November, the board, led by Sir Ashley, dismissed Iverson and named Hoare chief executive officer. In January 1998, it named a new chief executive for its North American operations, Michael Appel, a former merchandising director for Bloomingdale's, and posted losses of £25.5 million.

During Hoare's brief tenure as chief executive, he halted Iverson's aggressive expansion program and began plans to sell the company's four factories in Wales and one in the Netherlands. In March 1998, the company sold Laura Ashley Japan, which had continued to earn profits, to Jusco, while still maintaining a 27 percent share of the company. In April 1998, Malayan United Industries (MUI), which ran the Malaysia department store chain, Metrojaya Bhd, entered into an agreement to purchase 40 percent of Laura Ashley. In return for its purchase, MUI appointed four new board directors. Sir Bernard Ashley left the board, replaced by his son, in June 1998.

Victoria Egan, the former head of an MUI Group mall in the Philippines, took over as chief executive of Laura Ashley in August 1998. Under her administration, the company restructured, devolving much of its administration to three headquarters--one in Europe, one in North America, and a third in east Asia--and closed ten of the 30 larger North American stores. Egan's tenure was even briefer than Hoare's; in January 1999, she was replaced by Ng Kwan Cheong, an executive of MUI.

When the company's bankers threatened to end their financial support if Laura Ashley did not shed its North American operations, MUI stepped in again. This time, the company's North American management bought the 100 U.S.-based stores, headquarters, and warehouse for $1 and agreed to write off their $34.4 million debt in April 1999. Laura Ashley North America had lost $64 million in 1997 and 1998. The new Laura Ashley, Inc., headquartered in Boston, began remodeling almost immediately to turn its large stores into intimate boutiques. As part of its strategy, the company began to beef up its brand-licensing program in home furnishings and planned to increase this category of products from 45 to 60 percent.

After disposing of its North American franchise, Laura Ashley Holdings raised £25 million in a rights issue that enabled it to eliminate its bank borrowings. Ng Kwan Cheong then led the company to restructure its product and price range and to carry out a study on customer expectations. Examining the company's supply chain, he expanded its number of suppliers. Looking at advertising, he branched out from promotional to brand advertising. By the end of 1999, Laura Ashley had posted a solid rise in sales and gross margins over the Christmas period. In 2000, the group expanded its home furnishings units in many of its stores and began plans to open additional stores in France and Germany and to develop an online shopping facility.

Principal Subsidiaries: Laura Ashley Ltd.; Laura Ashley Investments Ltd.; Laura Ashley B.V. (Netherlands); Laura Ashley Manufacturing B.V. (Netherlands); Laura Ashley Distribution B.V. (Netherlands); Laura Ashley Investments B.V. (Netherlands); Laura Ashley Trading B.V. (Netherlands); Laura Ashley N.V. (Belgium); Laura Ashley Gmbh (Germany); Laura Ashley Gmbh (Austria); Laura Ashley Srl (Italy); Laura Ashley Espana S.A. (Spain); Laura Ashley Shops (Ireland) Ltd. (Ireland); Laura Ashley Shops Ltd. (Canada); Laura Ashley, Inc. (United States).

Principal Competitors: Next plc; Oasis; Guccio Gucci SpA; Polo/Ralph Lauren Corporation; Chanel S.A.; Debenhams plc; Marks and Spencer plc.

Laura Ashley Holdings plc History

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