When will Ted Baker disaster show end?
Both the shares and Ted’s reputation have taken a fresh hit after another terrible performance.
10th December 2019 13:53
by Graeme Evans from interactive investor
Both the shares and Ted’s reputation have taken a fresh hit after another terrible performance.
As a brand that likes to do things “out of the ordinary”, Ted Baker (LSE:TED) has certainly been true to its word after a catastrophic year left its once proud stock market reputation in tatters.
The final straw as far as many shareholders are likely to be concerned came today with yet another profits warning and the suspension of dividend payments. It's a dramatic fall from grace for the retailer, whose shares have slid 92% to 257.6p from over 3,200p as recently as March 2018.
This includes another fall of as much as 35% today after the company's warning that poor November and Black Friday trading would leave profits for the year to January closer to £5 million, rather than the £27 million the City had been forecasting following three previous downgrades.
Source: TradingView Past performance is not a guide to future performance
Only last week, the company was forced to admit it had overstated the value of its stock by as much as £25 million. After such a disastrous year, the company has announced the exit of former finance director Lindsay Page, who only took over as CEO in April following the departure of founder Ray Kelvin in the wake of harassment allegations.
Page joined the group in 1997, just prior to the company's IPO and at a time when Ted Baker had six shops and one concession in the UK and a turnover of £14 million. It now has a presence in 50 countries, with 560 stores and concessions built around a reputation for a “quirky yet commercial fashion offering”. Rachel Osborne, who only joined as finance chief last month, takes the top job on a caretaker basis.
As well as the boardroom clear-out, which includes the departure of chairman David Bernstein, the company has said it is looking to eek out further cost savings and has put the 58.6p a share full-year dividend on ice. The interim award was slashed by 56% to 7.8p in August, when the company reported net debt of £141 million — similar to today's market value.
The question for investors now is how much worse it can get, particularly with the search for a full-time CEO not due to start until the new year. There's at least the consolation that the Ted Baker brand remains a powerful force on the high street, even if some consumers are being drawn to cheaper alternatives in the current uncertain trading climate.
Kelvin still owns about 35% of the stock, so there's the chance he may reclaim control through a private equity-backed takeover. Superdry (LSE:SDRY) has been through a similar experience and is showing signs of share price stabilisation following last year's return of founder Julian Dunkerton.
In the meantime, however, there's a worrying lack of momentum behind Ted Baker trading. Revenues were down 0.3% to £203.8 million in the 17 weeks to December 7, including a 4.8% decrease for retail sales.
Whereas this performance was close to forecasts, the bigger worry for analysts is that margins are below expectations amid promotional activity across the sector.
This reference may ring alarm bells for followers of other retail stocks, even though there's been little else to suggest that Black Friday was particularly tough for the sector. In fact, high-flying Boohoo (LSE:BOO) shares recently surged to a record high after the AIM-listed company upgraded guidance based on strong November trading.
At a time when industry sales are increasingly shifting online, Ted Baker's e-commerce sales were down 0.7% in today's update. Previously reported challenges with the spring/summer collection in womenswear also haven't helped the cause this year, nor has the company's exposure to sales in the structurally challenged department store sector.
Strategic developments by Ted Baker in recent months include the reorganisation of its Asia operations and introduction of monthly product drops and speed to market enhancements.
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