Business Overview
 
Laura Ashley Holdings Plc (LON: ALY) is a general retailers company engaged in manufacturing and designing of products related to fashion and home. The company divided its operations into two reportable segments being Non-Retail and Retail. The company’s retail segment includes all sales done through stores managed by the company itself, hotel, e-commerce and mail orders. The company’s Non-Retail segment includes activities related to manufacturing, franchising and licensing.

Recent News
On 17th February 2020, Laura Ashley Holdings announced the response to the press speculation on the financial position. The company witnessed challenges in financial performance, and the sales declined by 10.8 per cent to GBP 109.6 million versus GBP 122.9 million in H1 FY2018. Due to weaker consumer spending and market headwinds, the revenue has declined for the period. Based on the customer deposit levels and stock movements in the recent period, the lender to the Group Wells Fargo has reduced the amount that can be drawn down from working capital facility. To meet the immediate funding requirements and working capital needs, the MUI Asia Limited, the Company's majority shareholder, and Wells Fargo are discussing arrangements, which will allow the company to use sufficient funds from facility given by Wells Fargo. MUI Asia Limited will not be injecting cash into the group as a part of arrangements. The company will try all appropriate options if not able to access the required level of funding. The company will announce its interim results on 20th February for the year ending 31st December 2019.

Share Price Performance

Daily Chart as of February 17^th, 2020, before the market close (Source: Thomson Reuters)

Laura Ashley Holdings Plc shares were trading at GBX 1.805 at the time of writing before the market close (at 2:42 AM GMT) on 17^th February 2020 and were down by 4.46% versus the previous day closing price. Stock's 52 weeks High is GBX 4.40 and Low is GBX 1.25. The shares of the company have delivered a negative return of 3.86 per cent in the last six months. The shares of the company have delivered a negative return of 43.15 per cent in the last month.

Conclusion
The company has shown a decline in the financial performance in the first half of the financial year 2020 and in the financial year 2019, with a decline in the top-line performance for the period. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The company’s P/E multiple is significantly higher as compared to the industry multiple, reflecting overstretched valuations. Recent customer deposit levels and stock movements in the recent period, the lender to the Group Wells Fargo, has reduced the amount that can be drawn down from working capital facility.

Based on the above rationale, we have given an “Avoid” recommendation at the closing price of GBX 3.25 (as on 14^th February 2020).

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