Laura Ashley shares tumbled more than 18 per cent after the homeware and fashion retailer issued its second profit warning in six months.
The company revealed that its full-year earnings would take a £2.8 million hit on the back of a revaluation of one of its freehold properties, compounding challenging market conditions which were already plaguing the retailer.
In a market announcement Laura Ashley said: “The results will show an exceptional £2.8 million impairment charge due to the revaluation of a freehold property owned by the group.
“In addition, and as previously disclosed, trading conditions have continued to be demanding.
“The board of the company therefore expect net pre-tax profits for the year ended June 30th, 2017, will now be materially below market expectations.”
Laura Ashley shares were down more than 18 per cent or 2p to 9p following the announcement.
The company’s stock price has been on a steady decline over the past year, and has now lost 60 per cent of its value since August 2016 when shares reached 23p.
Laura Ashley did not disclose the location of the revaluated property, but as of the end of 2016, its portfolio consisted of 190 stores across the UK, including 25 concessions.
However, the retailer said that 22 of its concessions would close by summer 2017 following the Bunnings acquisition of Homebase, but said it was taking steps to "minimise the impact to profit" on the back of those closures.
Laura Ashley last issued a profit warning in February, after reporting a 29 per cent plunge in pre-tax profits to £7.8 million for the six months to December 31st.
Market conditions
It blamed the disappointing results on poor market conditions, but said profits were also knocked by rising costs on the back of the weaker pound, as well as the new national living wage, which together contributed to a 6 per cent rise in operating costs to £52.3 million.
Retailers have been struggling under the pressure of climbing inflation which has soared in the wake of the Brexit vote.
Market jitters sent the British currency tumbling in the months following the referendum, helping push inflation to its highest level for nearly four years in May at 2.9 per cent, before easing back to 2.6 per cent in recent months.
The net result has been an increase in import costs for retailers, who have then passed this on to cash-strapped households already struggling with low wage growth.
Laura Ashley will release its full-year results on August 23rd.
– (Reuters)
