If you needed an example of a value trap, high street retailer Laura Ashley (ALY) is it. The shares have been cheap against the sector and the dividend yield has been high. But now the trap has been sprung, with the company issuing a profit warning as a result of weaker sterling and new minimum wage rates, both of which have led to rising cost pressures.
Chairman Dr Khoo Kay Peng described trading conditions during the opening half of the year as "demanding" - evidenced by a 3.5 per cent contraction in like-for-like UK retail sales. Even online revenue, traditionally a faster-growing segment for most retailers, only moved up by 2 per cent year on year. On home turf, revenue from home accessories moved in the right direction but top-line declines were recorded across furniture, decorating and fashion. What's more, like-for-like sales have continued to go south during the six weeks ended 11 February 2017.
The board says full-year profit will fall short of current market expectations, prompting a 30 per cent downgrade to FY2017 forecasts from broker Cantor Fitzgerald. Analysts there now expect pre-tax profit of £11m for the year ending June 2017, giving EPS of 1.2p, compared with £25.8m and 2.6p in FY2016.
| LAURA ASHLEY (ALY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 17.5p | MARKET VALUE: | £127m | |
| TOUCH: | 17-18p | 12-MONTH HIGH: | 26.5p | LOW: 16.5p |
| DIVIDEND YIELD: | 11.4% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 6p | NET DEBT: | 57% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 150 | 11.0 | 1.2 | 1.00 |
| 2016 | 146 | 7.8 | 0.9 | 0.50 |
| % change | -3 | -29 | -28 | -50 |
Ex-div: 23 Feb Payment: 17 Mar | ||||
