A business looking for a catalyst Laura Ashley frustrates by its inability to leverage such a well-known brand and it's not clear why this is the case.

Introduction

The Laura Ashley story is familiar to anyone of a certain age in the UK. Back in the '70s and '80s it offered a highly successful brand of florals, chintz and a certain form of Englishness. A total contrast to punk and even now the name retains a certain cachet. Sadly this recognition has proven hard to capitalise on over the last quarter century. A nadir was reached in 1998 when loan providers threatened to pull the plug and only the timely intervention of Malayan United Industries (MUI) saved the company - at the cost of MUI becoming the dominant shareholder. Since then the brand has slowly pulled itself back together with profits improving; but only as a result of cost-cutting and sales growth remains elusive.

Right now the group trades in 511 stores worldwide; 208 of which are located in the UK, Ireland and France, with the remaining 303 being franchise stores around the world. They operate five main store types comprising mixed product stores (selling all product categories), home stores (home products only), home concession stores, gift and accessories stores and a clearance outlet. There's also the direct business, encompassing e-commerce and mail order, which is a key part of the group’s multi-channel retail offering. Finally a pair of branded hotels complete the business; unusual but possibly a sound move. So Laura Ashley looks like a business that should prosper in the 21st century.

Why am I interested in the shares though? Principally because they boast a very high StockRank of 98 and score highly in all of the areas (value, quality and momentum) that go into calculating this rank. From the value side an amazingly high yield of 7% plays its part but Laura Ashley also has P/E and P/S ratios that are at the cheap end of the market. The sales and earnings underpinning these metrics are also of decent quality with a very high return on capital, >30%, and solid Piotroski and Altman Z-scores. Finally share price and earnings surprise momentum are also pretty good despite price weakness since the summer.

The problem is knowing whether this share will remain…

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