Laura Ashley is tripped up by small print but pins hopes on rights issue

Unless there is a sudden - and very unexpected - revival of interest in floral print dresses, the fortunes of the Laura Ashley label look very unfavourable. Two decades after its arrival in Ireland, the English chain store is experiencing turmoil as shifts in fashion and consumer habits take their toll.

Late last month, Laura Ashley admitted it was close to collapse and would have been declared bankrupt but for the intervention of its Malaysian backer MUI, which took a 40 per cent stake in the company a year ago and put almost £44 million sterling into the business. However, even this was insufficient to stave off further crisis and additional assistance now appears necessary.

Founded some 30 years ago by the eponymous Laura Ashley and her husband, Bernard, the chain was one of the star retailers of the 1970s when every woman wanted to buy its lace-trimmed blouses and smock-fronted dresses.

Trouble seemed to start almost immediately after Laura Ashley's death in 1985 but has gathered pace over recent years as fashion moved away from fussiness towards pared-back minimalism. Laura Ashley made efforts to adapt itself to the new market; in 1995, it hired Ann Iverson, an American who had been responsible for revitalising Mothercare, as chief executive. She tried to give the company a new image of understated chic but succeeded only in confusing consumers before leaving in November, 1997.

The business has gone through no less than six chief executives in nine years; earlier this year, it appointed an American television evangelist Pat Robertson, to the Laura Ashley board, prompting suggestions that the company was now reduced to praying for a miracle recovery.

In fact, Laura Ashley's problems are now so great that divine intervention would certainly be appreciated. Last month, bankers insisted the chain's loss-making 106 American outlets be sold off for just $1 - involving a write-off of more than £20 million of inter-company debt - and Laura Ashley now intends to make a £25 million rights issue; the cash raised by the latter will be used as working capital and to settle further bank debts.

At the end of January, Laura Ashley reported losses of £16.7 million for the previous 12 months, with a slump in sales of some 16 per cent (30 per cent in the US). Clearly, the combination of inability to adapt to changing market demands and a money-draining American operation has had devastating consequences. However, this is by no means the only English chain to have reported trading difficulties of late; last November, for example, Marks & Spencer announced a 23 per cent drop in profits. On Dublin's Grafton Street last week, Laura Ashley's Irish flagship was advertising a sale in its windows with reductions of 30 per cent.

It was by no means the only outlet to do so. Other chains offering reductions to shoppers included Wallis, Warehouse, Racing Green, Miss Selfridge and Principles. According to a spokeswoman for Laura Ashley in London, "It's very much business as usual in terms of the UK and European shops. Everything depends on the rights issue going ahead". She said the company had set aside £2 million to refurbish more than 40 of its outlets but was unable to confirm whether any Irish branches would be included in this list.