High street retailer Laura Ashley is desperately trying to unlock more money from one of its main lenders after Wells Fargo started to tighten the purse strings.
The company said its majority shareholder, MUI Asia Limited, is “discussing arrangements” that could allow Laura Ashley to draw on more cash from the US bank.
Shares plummeted by more than 38% on the news, down 1.25p to 2p.
The retailer agreed a £20 million loan arrangement with the lender in October last year. However restrictions in the loan meant that the chain would be prevented from drawing it all unless it could meet some criteria.
“Recent movements in the group’s stock and customer deposit levels have led to a reduction in the amount that the group can draw down under its working capital facility with Wells Fargo,” the company said.
We acknowledge that recent trading conditions ... have indeed been challengingAndrew Khoo, chairman
The company said MUI Asia and Wells Fargo are “discussing arrangements” that would allow Laura Ashley to draw on more of the loan. However “these arrangements do not involve a cash injection by MUI Asia”.
In an update to shareholders, Laura Ashley, founded in 1953 and a favourite of Diana, Princess of Wales, said that sales had fallen nearly 11% in the last six months of 2019.
“We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging,” said chairman Andrew Khoo, who is the son of MUI Asia’s owner.
“There is however a robust plan in place to turn the business around.
“The major shareholders have indicated their continued confidence in the business and are fully supportive of the management team and execution of the transformation plan.”
The news will spark more questions about the future of the fashion retailer, which employs around 2,700 people.