Ted Baker, which was until very recently a stock market darling, has issued its second profit warning in four months.
The business’ share price consequently plummeted, crashing 30% as investors awoke to the bad news.
Group sales were up but retail sales – including ecommerce – slipped 0.3%. Wholesale outperformed retail, rising 14.2%.
Ted Baker’s new chief executive Lindsay Page, the retailer’s former chief operating officer who took over from founder Ray Kelvin, who stepped down after allegations of inappropriate behaviour, attributed the fall-off to tricky, promotion-heavy markets, unseasonable weather and to “challenges” with its spring/summer collections that have been “appropriately addressed”.
The statement was markedly different from those usually ushered out by the business – a uniform self-congratulatory few lines on brand power and product quality.
“The brand invests little in high-cost marketing, so the product needs to speak for itself and be on point at all times”
Anusha Couttigane, Kantar
“We are proactively addressing the challenges we face as an industry,” Page said. “Several of our new product initiatives will commence imminently and we are confident in our collections for the coming season. We are relentlessly focused on achieving cost efficiencies as well as further cost savings throughout the business.”
Reading much of the commentary around the results, you’d have thought that the poor performance was down to Kelvin’s absence from the business. But that’s not how fashion retail works. The substandard spring/summer collection would have been designed during Kelvin’s tenure.
As Kantar’s Anusha Couttigane identifies: “As a product-first brand, which relies heavily on the reception of its quirky fashion ranges and lifestyle goods, this is critical. The brand invests little in high-cost marketing, so the product needs to speak for itself and be on point at all times.”
That product also sells for a significant amount of cash, which consumers do not seem to be willing to part with quite so readily at the moment.
“It is really expensive,” says Peel Hunt analyst John Stevenson. “Ted is a premium product but it [the price point] has been stretched as far as it can be.”
External factors have, to be fair, played their part. The discount-heavy US market, consumer confidence under pressure in the UK and weather patterns have all had an impact. But, as Stevenson points out, Ted once seemed immune to such forces.
“It used to not suffer any impact from external factors,” he says. “We could have a five degree Easter or 40 degree November and the numbers wouldn’t miss a beat. In fact, the Ted shopper would be in there early buying occasionwear. They are starting to see the impact from external conditions in a way that they haven’t seen before.”
Ted’s management will need to ensure that it is not riding on the coattails of more dynamic years if they are to arrest decline and ensure that the recent poor performance is a blip. But they may have bigger problems to contend with if the shrinking share price attracts acquisitive attention.
It has been suggested that the retailer could be vulnerable to a takeover in its weakened state, a possibility made more interesting by Kelvin’s 35% stake and reputation for brand engineering.
While Kelvin’s absence is not the reason for Ted’s decline, his responsive abilities might be valuable to anybody looking to refresh product. Some City analysts wonder whether we could yet see Ray’s return.