Ted Baker today said high levels of discounting allied with consumer uncertainty were likely to hold back profits in its current financial year. In-store retail sales fell while online sales grew slowly in the opening months of its financial year, it said.
It is forecasting full-year profits of between £50m and £60m - representing flat or slow growth in profits from £50.9m in its last full-year.
Ted Baker today said that sales in the first 19 weeks of this financial year, to June 8, were 3.8% higher than at the same time last year. Within that, retail sales fell by 0.3%, and by 1.1% on a like-for-like basis that strips out the effect of store openings and closures. Ecommerce alone was 2.4% ahead of last time and represented 26% of total retail sales. That’s up from 25.3% at the same time last year. Wholesale meanwhile, rose by 14.2%, but fell by 1.2% on the same time last year.
The upmarket lifestyle brand, ranked Top250 in IRUK Top500 research, said the business had been affected by difficult and unpredictable trading conditions, unseasonable weather in North America, and by “the highly promotional retail environment across our global markets.” There had also been challenges with its spring and summer collections that it said had now been addressed.
Ted Baker chief executive Lindsay Page said: “Ted Baker remains an outstanding brand and, underpinned by the strength of our flexible business model, including a relatively low number of own stores that showcase the brand, we remain confident in our long-term growth prospects.
“As a team, we are proactively addressing the challenges we face as an industry. Several of our new product initiatives will commerce imminently and we are confident in our collections for the coming seasons. We are relentlessly focused on achieving cost efficiencies as well as further cost savings throughout the business.
“We remain committed to the long-term development and expansion of Ted Baker as a global lifestyle brand. Over recent years we have made a number of significant investments to ensure that the group is well positioned to continue to adapt to structural changes in the retail sector.”
Commenting, Sofie Willmott, lead retail analyst at data and analytics business GlobalData, said the update represented a “terrible start” to the year for a “previously untouchable” retailer.
“When incremental sales from the retailer’s acquisition of footwear brand No Ordinary Shoes are stripped out, retail revenue declined 1.1% and with challenging trading conditions anticipated for the remainder of the year, profit before tax is now expected to be £50-£60m (versus £59.9m in FY2018/19),” she said. “Following the disappointing results, shares nosedived, falling 25% this morning. As a result of its past success and demand for the brand, Ted Baker products are widely available from department store players like John Lewis and House of Fraser, and online pure plays including Asos and Very, but overexposure can image brand appeal, particularly when it is positioned at a premium level.
“Alongside this, the struggles of apartment store retailers coupled with the misconduct allegations against the brand’s found Ray kelvin, who stepped down permanently in March, will not have helped its performance. To reverse its sales decline, Ted Baker must rein in the number of distribution partners it has, to reaffirm its premium positioning.”
She added “Ted Baker has reached a point where it will either sink or swim. For the brand to be able to survive without its former leader and retain its loyal shopper base, it must seize the opportunity to shake up the business and re-establish its brand identity.”
Image courtesy of Ted Baker