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Ted Baker says profits rise but warns 'challenging' conditions remain

Published 11/10/2016

Founder and chief executive Ray Kelvin hailed a strong performance
Founder and chief executive Ray Kelvin hailed a strong performance

Fashion chain Ted Baker shrugged off tough trading on the high street to hike half-year profits by more than a fifth, but cautioned conditions remain "challenging".

Founder and chief executive Ray Kelvin hailed a strong performance despite difficult trading in all its markets as the group posted a 20.5% leap in pre-tax profits to £21.5 million for the six months to August 13.

The firm notched up a 13.6% rise in retail sales, up 9.6% with currency movements stripped out, helped by surging online sales in the first half - up 29.7%.

Mr Kelvin said Ted Baker "continues to perform well" since the first half and the group is pleased with the reaction to its autumn/winter collections.

But it warned: "Ongoing external factors impacting trading across our established markets have meant that conditions remain challenging."

The results come amid a torrid past few months for high-street clothing chains.

Next, John Lewis and House of Fraser have all warned over difficult trading in recent weeks amid a shift in consumer spending, while last month's unexpected heatwave caused chaos for clothing stores.

Ted Baker said across the UK and Europe, where it has 283 stores and concessions, sales lifted 8.5% or 6.7% on a constant currency basis over the first half.

In the US and Canada, where it has 106 stores and concessions, sales jumped 18.8% on a constant currency basis, while sales lifted 6.5% across its remaining international business.

The group expanded further over its first half, including more concessions in the UK, and it confirmed aims to continue extending its international footprint, with more stores and concessions set to open across the US and Asia.

It said the full-year performance would be driven by the all-important Christmas season, but added it was "confident of making further progress".

Shares lifted nearly 4% after the interim results, but the stock has fallen sharply in recent months, down around 28% since a high last November, on fears over the weakness of US department stores and challenging conditions in Asia, with the declines compounded recently by Brexit.

Retail analysts said the share falls have been overdone, with experts at Liberum saying Ted Baker continues to "outperform in all weathers".

Ted Baker chief operating officer Lindsay Page said store sales per square foot of retail space were flat in the UK and Europe, stripping out the boost from online.

He said the wider UK clothing retail market was showing signs of slowing after hitting a peak last year, but said the group's wholesale and licensing business was helping it weather the difficult high street conditions.

He added that Ted Baker was shielded from the pound's slide, as it has hedged itself against currency movements until mid-2018.

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