Ted Baker shares hit after profit alert amid ‘extremely difficult’ trading
The group reported a 2.6% drop in like-for-like retail sales, on a constant currency basis, for the 19 weeks to June 8.
Troubled retailer Ted Baker has seen shares plummet by more than a quarter after warning over profits amid “extremely difficult” trading.
Shares in the fashion brand – whose founder, Ray Kelvin, left in March following allegations of harassment – tumbled 26% as it laid bare the impact of falling sales in tough retail conditions and woes with its spring and summer ranges.
It warned that underlying annual pre-tax profits were now expected in the range of £50 million to £60 million for the year to January 25 2020.
The alert came as it reported a 2.6% drop in like-for-like retail sales, on a constant currency basis, for the 19 weeks to June 8.
Wholesale comparable sales slumped 3.6% with currency effects stripped out.
The gloomy outlook comes after Ted Baker posted a 26.1% slump in pre-tax profits to £50.9 million for the year to January 26, having warned over the result in February.
The group blamed the latest trading troubles on “difficult and unpredictable” conditions, as well as unseasonable weather in the US and intense discounting across its global markets.
But it also admitted it had “experienced some challenges” with its spring/summer collections, which it claimed have now been addressed.
Ongoing consumer uncertainty in a number of key markets and elevated levels of promotional activity across our global markets have resulted in extremely difficult trading conditions during the financial year to date Ted Baker
It said: “Ongoing consumer uncertainty in a number of key markets and elevated levels of promotional activity across our global markets have resulted in extremely difficult trading conditions during the financial year to date.
“The board anticipates some of these external factors will continue to impact trade for the group and its trading partners across the remainder of the financial year.”
Ted Baker’s new boss, Lindsay Page, added that the group is now “relentlessly focused” on cutting costs to offset the trading difficulties.
She said: “As a team, we are proactively addressing the challenges we face as an industry.
“Several of our new product initiatives will commence imminently and we are confident in our collections for the coming season.”
It comes after Mr Kelvin – the former chief executive and founder – left the company following a raft of accusations, including that he enforced a “hugging” culture at the company, massaged employees, kissed their ears and asked some to sit on his lap.
An investigation concluded in April, finding “several areas for improvement” in the clothing retailer’s HR practices.
As a result, Ted Baker said it had launched a “refresh of its HR policies to ensure their alignment with current best practice”, but refused to comment on the specific allegations against Mr Kelvin.
John Stevenson, a retail analyst at Peel Hunt, said the scale of Ted Baker’s profit warning would “raise eyebrows”.
He said: “We believe the range challenges have been brewing for some time and do not reflect founder Ray Kelvin’s departure, albeit management’s response will be measured against the benchmark of ‘What would Ted do?’
“Sales levels do not suggest a brand in turmoil, although earnings recovery may prove protracted in our view, leaving the group vulnerable to bid threats.”