1. Assess the company’s recent performance. How serious is the company’s present predicament?
Laura Ashley’s business performance has been on the decline since the early 1990’s. Although with the numerous changes of CEO’s, including the highly paid turnaround executive Ann Iverson, Laura Ashley is still left far behind the competitors and unable to keep up with the growth of economy.
Laura Ashley’s decline of business performance can be observed from the following:
•Financials: sales have declined from 1995 to 1999, with the North America Region being the most noticeable: over 40% of decrease in five years. Profits have peaked near the mid-90 but decreased overall since the early 90’s. Deficits occurred nearly every year, especially negative cash flow, leaving decreased return for the stockholders and requiring even more to fund continuing operations. More capital has been raised by the issuance of stocks, partially used to buy back debt to relief interest expenses and retain relationships with financial institutions; rest goes toward the closure of stores and expenses of restructure, which has yet been proven effective. Stock prices have fallen to an all time low in 1998.
•Shortage of financing: banks have demanded Laura Ashley to decrease its debt and seem to be reluctant in lending more funds, just to see it getting drained by the continuing negative cash flows. Company currently only has one major source of funding, MUI, which owns 40% of Laura Ashley’s stocks, and its willingness to invest further is questionable since £43.5 million of investment only resulted in a deficit in 1999.
•Expansion vs. retrenchment: one of Iverson’s turnaround strategies is to rid the small, unprofitable stores, and open new, larger stores that are supposedly more potentially profitable. Floor space has increased since the mid-90 but number of stores has decreased. According to the financial data, the...