THE FLOWER TO CHANGE

In desperate need of a new sense of direction, Laura Ashley has brought in US retail expert Ann Iverson, responsible for turning round Mothercare in the early Nineties. But can she revitalise an empire spanning stores, factories and three cont

Laura Ashley has sown its seeds far and wide since the business started in a Pimlico flat in the Sixties. It has opened stores in countries around the world, expanded into home furnishings and accessories and established itself as a manufacturer as well as a retailer.

But some of its initiatives have fallen on stony ground. The business has now started to strip away the weeds which are choking it and put down some new roots. Last year, Laura Ashley’s operating profits were just 3.8m on sales of 322m.

Ann Iverson, chief executive at US retailer Kay Bee Toys, has been brought in to help restore life to the wilting flower. Laura Ashley has selected someone tough, who can give the company a new sense of direction.

Iverson proved her worth as a retail marketer by turning round the Mothercare chain between 1990 and 1994. She will join Laura Ashley as its new chief executive in July, at a time when the company is in the midst of a recovery programme instigated by the present management.

But Mothercare was a simple proposition – unlike Laura Ashley, with an empire which sprawls across stores, factories and three continents.

One danger, say observers, is that Iverson will freeze present company initiatives while she takes stock of the situation and decides how best to move the business forward. This could further delay any real recovery.

But she is no shrinking violet. Indeed, she is famously brusque and could make her presence felt quite quickly. She has been on the Laura Ashley board for the past year as a non-executive director and is familiar with its problems.

The business needs some firm guidance. Laura Ashley is like a tempestuous teenager who

cannot decide which clothes to wear to the ball, and Iverson will need to decide one way or the other: should Laura Ashley change frocks?

One insider says: “She has a lot to do. There are a lot of small stores around the country which have to carry the traditional floral merchandise, so they can’t sell the more contemporary look.”

Iverson will have to strike a balance between the traditional Home Counties woman who is still loyal to the floral style – which has changed little in a decade – and the more modern Nineties woman.

This task has already taken its toll on one chief executive. Jim Maxmin’s departure last year was believed to be over differences on strategy. “He wanted to rejuvenate the brand and move it on from the floral image,” says the source.

A further complication is Laura Ashley’s positioning as an upmarket brand. The company has problems trying to sustain such a proposition when money is tight for consumers.

Iverson will need to address a number of issues, such as how best to modernise the company’s image without alienating its loyal customers; whether the company can continue to be both a manufacturer and a retailer; and how the supply chain should be organised.

Iverson is well placed to come up with the answers. Her experience in designing a new format for Mothercare has given her an insight into the UK market and how to position Laura Ashley. And she has knowledge of the US market, where the company’s problems are at their greatest.

While in the UK the Laura Ashley name is synonymous with the Home Counties, floral prints and old fashioned “frocks”, around the world there are still plenty of women who can be won over by the “smock shop” styles and new markets into which it could expand, such as South Africa and South America.

City analysts predict worldwide sales of 350m for this year. The central problem, they argue, is not the global appeal of the brand but the lack of business and retail skills within the company. Profits for this year are predicted to be only 10m – when they should be more like 30m.

The analysts offer their usual remedy for companies in trouble: prune back the labour force and make the people that are left work harder.

NatWest Securities retail analyst Sean Eddie says: “Laura Ashley’s biggest cost problem is its huge wages bill. It needs to get greater productivity.”

The firm has set aside 34m for restructuring, including the loss of 200 jobs. The first step will be to sell off its London head office to the retail entrepreneur Stephen Hinchliffe and his Facia retail group. Other moves include closing down poorly performing stores.

The more painful exercise comes in rationalising its stock – the firm has chosen to concentrate on its core product areas of womenswear, home furnishings and children’s clothing. It will need to clear away the many accessories that have been sold in its stores, and this will mean marking items down to move them, which will impinge on gross margins.

But Iverson will also have to make one of the biggest decisions of her career – whether the company should maintain its status as a manufacturer.

It’s a tough one to call. Retailers who make their own products do well when times are good. By cutting out the middle man, they increase profits when sales are strong. Conversely, when consumer spending is slack, the retailer/manufacturer has to withstand extra pain and bear the costs of idle productive capacity. It is also unable to seek out the cheapest deal in a supplier market which will bend over backwards to win business.

With talk of the crucial UK housing market lying dormant for the next 20 years, it could be a long time before consumer confidence returns. In deciding whether Laura Ashley should remain a manufacturer, Iverson will need some accurate forecasts from reliable economists (if such creatures exist).

Iverson’s ability to control the supply chain has yet to be proved. One of Mothercare’s fundamental problems has always been its inefficient stock control systems and the proliferation of suppliers. But these problems are now being addressed under the direction of Storehouse chief executive Keith Edelman. Iverson’s impact on the chain was more in the line of its positioning and consumer appeal. One observer says: “She has a proven track record at the sharp

end of store design and merchandise. She is not known as a technician.”

What Iverson will undoubtedly bring to Laura Ashley is the basic retail skills: getting customers into the stores, and giving them an interior design that persuades them to spend their money.

And when it comes to taking the hard-nosed decisions that could see jobs slashed, the supply chain ripped apart and overheads hemmed in, Iverson’s temperament should serve her well. People who worked with her at Mothercare confirm that she’ll have no qualms about making hard decisions.

Helena Packshaw, marketing director of BhS, part of the Storehouse group, says: “She is very creative, aggressive, extremely streetwise and a lot of fun. You either love her or hate her, and that varies depending on the job she is there to do. At BhS a lot of people thought she was really good, but some people didn’t get on with her.” She will have an awful lot to grasp when she takes up the mantle in July. The US market is especially tough and price competition is endemic, though she never tires of saying she likes a challenge.

Iverson may have time on her side. The Nineties are more suited to the values of Laura Ashley than the Eighties were.

As Sammy Harari, whose advertising agency Harari Page has worked with Laura Ashley for the past 18 months, says: “There is a feeling that it now has a major opportunity. The Eighties was about power dressing, glitz and glamour, which didn’t sit so well with the brand image. But the Nineties are softer, fashions are more fluid and feminine, and Laura Ashley can capitalise on that.”

Iverson reckons it will take her four to five years to restore sustainable profits to the company. In the meantime, she will not shrink from the tough decisions that need to be taken.

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