FEER : Blooming Again
Yap Yok Foo
Issue cover-dated 3rd May 2001
Blooming Again
Floral frocks are out, profits are in as a Malaysian company gives
Britain's Laura Ashley a makeover
By Charu Lata Joshi/LONDON
WHERE HAVE ALL the flowers gone? Shoppers at British clothing retailer
Laura Ashley may well ask. Once synonymous with floral frocks and
flouncy smocks, the label has had a profound change of image--and a
reversal of fortunes.
Malaysian United Industries, which runs a chain of retail stores in
Malaysia, saved the group from liquidation in 1999 by injecting £44
million ($63.5 million) for a 43% stake in the company. The move had
echoes of the 1994 takeover of British sports car and automobile
consultancy group Lotus by Malaysian automobile giant Proton.
When Ng Kwon Cheong took over as Laura Ashley's chief executive in
1999, the group was battling bankruptcy with losses close to £25
million. In a sweeping rebranding exercize, the label banished floral
prints, opting instead for a more stylish collection, and increased
emphasis on home furnishings--a key growth area.
The new strategy is working. Laura Ashley made a pre-tax profit of
£1.7 million for the first six months of 2000, against losses of £7
million for the same period the previous year. Figures released last
month show Christmas sales were up by nearly 12% over last year's
festive season, convincing industry gurus that it had indeed succeeded
in achieving a dramatic U-turn while many high street retailers like
Marks & Spencer are fighting against falling prices and declining
sales.
"After over 10 years of frustrating losses and mismanagement it
appears that the new management team have gone back to basics and
finally got it right." says London-based corporate recovery
specialist, Jas Joshi.
How did they do it? "Our modus operandi was clear. First, to put the
company back on a firm financial footing and second, to focus on a new
strategy for our target audience," says Ng.
Laura Ashley's change in image has been as dramatic as its sudden
turnaround. Before the takeover, floral frocks and old-style
accessories were as much a part of the group's image as were the
losses it had been steadily showing. Now, frumpy floral prints are
nowhere to be seen. "The clothing ranges have been adapted to suit
women aged 30 upwards who want stylish clothes. The look is
fashionable, not teenage trendy," says the group's spokeswoman Diane
Bourne. More importantly, as Bourne adds, "we are serving a lifestyle
now and putting a lot of effort into our home furnishing and gifts
range." Home accessories, such as coffee tables, lamps, rugs and
paintings, which earlier served as not-for-sale props in Laura Ashley
catalogues are now sold as part of the complete lifestyle image.
BACK TO BASICS
Home furnishing has traditionally been a high seller for Laura Ashley.
And the group credits the spurt in sales during the first half of this
year to continued strong performance in lifestyle accessories. Moving
to strengthen its home furnishings portfolio, the group recently
launched an interior-design service. Home-owners in Britain and other
parts of Europe can now pay to have their homes designed by Laura
Ashley's interior designers. The group also plans to open up to 100
furnishing stores in Britain within the next three years. "We went
back to find out what our target customers really wanted. We realized
that to them Laura Ashley denoted a lifestyle and not just clothes,"
says Ng.
Rebranding has been just one part of the turnaround. Laura Ashley's
recent move into the black has been aided by its determination to cut
costs. According to Jim Bellingham, group finance director, the group
aims to reduce the percentage cost of sales to below 40% within the
next year. The group cut down on adminstrative costs by closing
offices in France and Germany. Plans are under way to open more stores
in these countries. Similarly, the success of its franchising
experiment with Japanese retailer Jusco has convinced Laura Ashley of
the path to take in Asia. It now plans to look for more franchise
partners throughout the region.
While the label looks healthier today than it has done in years, it is
hard to imagine what could have possibly attracted the Malaysian group
to Laura Ashley. The business was reeling from a succession of
disastrous management decisions and was perilously close to exiting
High Street altogether. "The company had a very respectable name. It's
not a name people would sneer at," says Ng. "We did our due diligence
and recognized that there were areas we could build on. Today I can
say we were not wrong."
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**************From Uncle Yap**************
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