Brief Introduction to the Laura Ashley Group

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Laura Ashley analyst report

Brief introduction to the Laura Ashley group

Laura Ashley group were founded in 1953, and is currently an international retail chain which specialises in retailing furniture, home accessories, decorating and fashion products. However the business has also diversified and now they have 1 hotel in Hertfordshire, and a licensing agreement with Corus hotels limited, which owns the Laura Ashley hotel on Lake Windermere. Laura Ashley are a company with high standards, who are very proud of their British heritage, and whenever possible like to manufacture their products using British materials. In May 1998 the Laura Ashley Company was taken over by MUI Asia limited. This was at a time when the company was beginning to struggle, due to over expansion, however since the takeover the company has managed to remain profitable in a heavily competitive market.

Markets and products

As of January 2015 the Laura Ashley group had 205 stores operating in the UK selling many different types of products. The main area of the company’s sales are 30% of home accessories and 30% furniture followed by 23% decorating and 17% fashion. As you can see the company performs best in the market of home improvements, and does less well in the fashion industry. They have in fact seen a 2.8% drop in their fashion sales in the last year (pg. 9). This decline could be due to the lack of diversity in the clothing product range, or due to a lack of focus by the company, on the fashion side of the business as they were too focused on other areas of the company. For instance home accessories which saw a growth of 4.8% in the last year. The fashion market is a highly competitive market, which is ever adapting, and a lack of focus can mean a company can quickly fall behind competitors.

Where Laura Ashley can a strong area of revenue is in its hotels. This year the turnover from the Manor hotel grew by 36% to 1.9 million during the year and with a second hotel just opened during the year can only mean a larger growth in revenue as that venture has already been well received by both the media and consumers. However hotels are high risk industry to enter into, as they have high setup costs, and our heavily reliant on the reputation of the hotel. This can be a vital advantage over competitors, but yet it is fragile and can be damaged by one or two bad reviews. As most consumers now make booking decisions by using hotel review sites such as trip advisor. In terms of entering new overseas markets, the company seems to be doing very well, as they currently have franchises in 30 different territory’s with plans already to infiltrate the Asian sector in countries like Singapore.

Growth in the last five years (pages 19 65)

In the last 5 years the company has seen an increase in its profit from operations, especially in 2015, where the increase was dramatic going from 19.1million in 2014 to 23.8 million in 2015. The Laura Ashley group are also keeping a higher percent of their revenue in their operating profit figure growing from 6.95% in 2011 to 7.8% in 2015. This shows the company has been able to lower either their cost of sales or by lowering operating expenses. Either way this shows business growth, as the less revenue being used for business costs, and expenses, is more money to keep in the business. There are many ways for a company to lower their expenses and cost of sales. It can be done by either making the company’s manufacturing more efficient, or can be done by finding cheaper suppliers too lower cost of purchases.

Since 2014 Laura Ashley group has gone from having 209 stores to 205 stores open in the uk which involved opening 3 new ones, and closing 7 stores, meaning total selling space fell by 3.2%. This represents negative growth within the UK, as the company is losing out on more potential sales, due to less stores. However the focus of the company seems to be too spread out into international franchising, with a growth of 17 more franchises opening up in other countries during the 2015 year with further franchises already agreed to open next year with a view to optimise new expanding markets in the Asian sector. This is a great way to stimulate the growth of the business as it opens the business up too more potential customers.

Since 2011 though the Laura Ashley group has seen revenue consistently rise from 285 million in 2011 to 303.6 million, in 2015 a rise by 6.5%. However the profit for the year in the last 5 years has never reached the same high as it did in 2011, going from 19.3 million in profit to 18.3 million which is a decrease of 5.18% although 2012-2015 there has been a continual rise in profit, the 2011 figure stands out as the high point of the company and, the company seems to of failed to grow to that same level since. Although it seems they will be growing to overtake this year. The business is also struggling to keep as much percent of its revenue as it did in 2011 where the company kept 6.77% of all revenue compared to only 6.03% in 2015.

Analysis of 2015 results

Between 2014 and 2015 the company has kept its gross profit margin at a very flat rate. Between the years there has been an increase of 0.01 pence to be at the current rate of 42.52%. This means that 42.52% of all sales makes it into gross profit without being deducted by the cost of sales. This looks healthy but is relative to the industry average, and the best way to judge gross profit is to bench mark against competitors, however gross profit would suggest good levels of profitability.