Laura Ashley has confirmed that its Malaysian owner is locked in make-or-break talks with its bank over access to emergency funding as the fashion and furniture retailer revealed a steep drop in sales amid “challenging” conditions for the sector.

The company, which is listed in the UK, said it would have to “consider all appropriate options” if it could not get hold of more cash, raising fears for the jobs of more than 2,700 workers.

MUI Asia, which is controlled by the multimillionaire shareholder Khoo Kay Peng, and Wells Fargo are trying to reach an agreement over Laura Ashley’s funding requirements in the short to medium term.

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Sales slumped by 10.8% year on year in the second half of 2019. The company blamed “market headwinds and weaker consumer spending”, which it said had dampened demand for larger, more expensive items. Sales were flat for the first seven weeks of trading this year.

The pressures on the retailer, which plans to close more of its 155 UK stores, have been exacerbated by a fall in stock levels after Christmas. This has reduced its ability to offer assets in exchange for secured loans.

The company was started in 1953 by Laura Ashely and her husband, Bernard, with fabrics printed on their kitchen table. The company became a stalwart of the British high street and Princess Diana was a famous fan of its floral fabrics.

MUI became a shareholder in 1998, adding Laura Ashley to an empire that also includes hotels, food and financial services interests. Khoo was succeeded by his son Andrew Khoo as Laura Ashley’s chairman in 2018. The retailer has since endured a difficult time, with low consumer confidence and a weak housing market. It lost £14.3m in the year to 30 June 2019.

Andrew Khoo said: “We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging. There is, however, a robust plan in place to turn the business around and the board of directors is confident and optimistic that the recent appointment of Katharine Poulter [the incoming chief executive] will enable the business to execute this broad-based strategy.

“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.”

Laura Ashley’s statement said the talks with its lender did not include a cash injection into the group, contrary to some reports.

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The retailer was “well advanced in developing its turnaround strategy”, it said, but added that it was only at an early stage of carrying it out. Shares in the company, which is to report its first-half results on Thursday, slumped 38% to 2.24p.

In a further sign of stress on the high street, the low cost footwear retailer Shoe Zone warned it could be forced to close 100 stores – one in five of its UK chain – unless business rates are reduced.

Along with other retailers, the group is calling for a major overhaul of the business rates regime in next month’s budget.Anthony Smith, its chief executive, told the BBC on Monday that although its shop rents had fallen, the amount it pays in business rates had increased from 26% to 54% over the last 10 years.

“If people want vibrant high streets, they really do need retailers like us to keep our shops open in smaller towns,” he said, adding: “It’s a simple maths question. Every time a lease comes up, we’ll look at the mathematics of it. If we are not making any money out of it … the shop will unfortunately close.”