Laura Ashley first half profit leaps

Laura Ashley, home ware retailer and fashion brand, has crowned a recent turnaround in its fortunes with an almost 15% leap in first-half pre-tax profits.

The news sent the small-cap stock of Laura Ashley Holdings Plc. 11% higher, making the stock the biggest percentage gainer in the UK’s stock market today.

The firm indicated a further improvement of momentum on a like-for-like sales basis, in the first few weeks of the second part of the year.

Laura Ashley said like-for-like sales (these figures strip-out the effect of stores open less than a year) were 8% higher in the five weeks to 30th August compared with a gain of 1.2% in retail life-for-like sales in the first half.

Additionally, the firm appears to be feeding into what appears to be a firming-up of online retailing in the last month or so, apparent from trading reports by other retailers.

The group’s mail order and online revenue rose 6.1% during in the first half, with home wares accounting for 95% of online sales.

Strong first-half results after CEO joined in January

The online revenue rise also represents some vindication of Laura Ashley CEO Lillian Tan’s strategic re-think after taking the reins in January of this year.

Her plan is to cut the percentage of Laura Ashley revenues dependent on fashion sales to 14% from the 22% figure seen at the beginning of the year.

The company made £8.5m in first-half pre-tax profit, whilst total group sales increased 4.9% to £144m.

“We’ve launched our new-season home furnishing range … particularly on the decorating space, and that’s critical to our success in the second half” Chief Financial Officer Sean Anglim told news agency Reuters.

“As we’ve entered into the Autumn/Winter season, we’ve seen a really large pick-up in that (furniture) category for us. Our overall business like-for-like is up 8%, so it’s kind of consistent with that level”, Anglim added.

His optimism over the important autumn and winter retailing season is almost certainly correct.

Watch accounts receivable

On the fundamental side, an outstanding prospective yield that approaches 8% currently will continue to stand the firm in good stead with investors in Laura Ashley’s segment.

One small kink management will have to keep an eye on is accounts receivable expressed as ‘Days Sales Outstanding’-also known as average collection period. Whilst the issue is a potential headache for all firms which deliver goods, Laura Ashley’s level of 33 days on average is well above its peer group.

In terms of the share price, today’s outstanding performance has brought indications of a switch to good momentum in the buying side (the MACD signal) but also the completion of a roughly symmetrical ‘AB-to-CD’ pattern that often calls for a pause and retracement.

The stock trades 7% higher at 27.245p.