Ted Baker reaches balancing point

Shares in UK-headquartered Ted Baker slumped 25 per cent as the latest financial results show the fashion label may be losing its mojo.

After years of strong growth, the previously infallible Ted Baker says retail revenue fell by 1.1 per cent on a reported basis, and by 2.9 per cent at constant currency during the 19 weeks to June 8. The company warned shareholders its profit for the current financial year may fall by as much as 20 per cent to somewhere in the range of £50 million to £60 million.

CEO Lindsay Page blamed the result on weaker trading due to unseasonable weather in North America and a highly promotional retail environment worldwide which impacted on gross margins.

“As a team, we are proactively addressing the challenges we face as an industry,” said Page.

“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.”

Sofie Willmott, lead retail analyst at GlobalData, believes Ted Baker is suffering from overexposure.

“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 pureplays including Asos and Very.co.uk. But overexposure can damage brand appeal particularly when it is positioned at a premium level.

“Alongside this, the struggles of department store retailers coupled with the misconduct allegations against the brand’s founder, 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.”

Willmott said 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.”