Asia cited as Ted Baker swings to a loss
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UK fashion house Ted Baker has slumped into the red in the first half of the year, its position not helped by a 15.2-per-cent fall in sales in Asia.
Global revenue was down by a more modest 0.7 percent (or by 2.5 percent in constant currency) to £303.8 million, but pre-tax profit turned from a £25 million surplus in the first half of last year to a loss of £2.7 million. The company took a £11.8 million one-off hit on the restructure of its Asian business, where it has appointed partners in Greater China and Japan, and £3.5 million relating to the purchase of a footwear business in January.
Sales in Asia were £9.5 million and sales per square foot excluding e-commerce sales decreased by 4.6 percent.
E-commerce concession businesses in China and Japan delivered sales of £1.4 million, down from £1.7 million, which represented 14.7 percent of Ted Baker’s Asian sales.
Licensed stores across Asia continued to perform well with existing license partners in Thailand, Singapore and India opening new stores. However, in Indonesia and South Korea, several partner stores were closed.
Despite the loss, Ted Baker is optimistic about its future prospects, saying its Autumn/Winter collections have been well received and that it is excited about new product initiatives including monthly product drops and speed to market developments.
“Despite the structural challenges and cyclical pressures on the industry, we remain confident in Ted Baker’s ability to navigate the market and further develop as a global lifestyle brand,” the company said in a results statement. “This confidence remains underpinned by the group’s flexible, omnichannel model, the continuing strength of the brand, and the skill, passion and commitment of our talented teams worldwide.
“Sales in Asia were £9.5 million and sales per square foot excluding e-commerce sales decreased by 4.6 percent.”
“We are continuing to pro-actively manage the significant challenges impacting our sector including weak consumer spending, macro-economic uncertainty, and the accelerating channel shift towards e-commerce. However, we are not immune to these pressures which have impacted our financial performance during the first half of the year.”
Emily Salter, retail analyst at GlobalData, said it was worrying that Ted Baker’s online sales had declined given its strong multichannel proposition.
“The retailer can therefore not solely blame the troubles of the physical high street for its fall from grace, as it has previously performed strongly online even as retail revenue growth became more subdued. This points to more significant problems with demand for the brand and the impacts of regular discounting.”
Salter says that for Ted Baker to be able to revive itself without its founder and former leader playing a key role, it needs to re-establish its brand identity, retain its loyal shopper base and reduce its reliance on discounting.
“The retailer should take the opportunity to poach Karen Millen and Coast shoppers who are reluctant to purchase online, as the premium brands’ stores and concessions are now closed as a result of the acquisition by the Boohoo group. Ted Baker should review its sales channels, as it sells through department store retailers and online pureplays, leaving it exposed to the troubles of players such as House of Fraser and Debenhams. Moving its childrenswear license from Debenhams to Next in Spring 2020 will help to address this as Next’s leading online platform will be able to generate much stronger growth than the embattled department store,” she said.
Questions & Answers
Q.What was the main reason for Ted Baker's loss in the first half of the year?
What was the main reason for Ted Baker's loss in the first half of the year?
The company reported a £2.7 million loss due to a significant £11.8 million one-off hit from restructuring its Asian business and a £3.5 million cost from acquiring a footwear business.
Q.How did Ted Baker's sales perform globally and in Asia?
How did Ted Baker's sales perform globally and in Asia?
Global revenue decreased by 0.7 percent to £303.8 million, while sales in Asia saw a more substantial 15.2-per-cent fall, contributing to the overall decline.
Q.What concerns did retail analyst Emily Salter raise about Ted Baker's performance?
What concerns did retail analyst Emily Salter raise about Ted Baker's performance?
She found it worrying that online sales had declined, suggesting problems with brand demand and impacts of regular discounting, rather than just issues with physical stores.
Q.What strategic moves is Ted Baker making regarding its childrenswear business?
What strategic moves is Ted Baker making regarding its childrenswear business?
Ted Baker is moving its childrenswear license from Debenhams to Next starting in Spring 2020 to use Next's strong online platform for better growth.
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