Loss-making Ted Baker looks to future prospects as the present proves tough
today Oct 3, 2019
Ted Baker has had to adjust to a different world in the past few years with the former high-flyer struggling to kick-start a recovery in the face of tough times on the high street. So its interim results on Thursday were closely watched to see if it’s on the comeback trail yet.
And is it? Not really. It swung to a loss and its chairman delivered a very downbeat assessment, saying its H1 figures “were behind our expectations.” And David Bernstein added that “trading in the second half has started slowly, not helped by the unseasonably warm weather in September.”
He said this will have an impact on the full-year outcome and “if these trends continue, we will achieve a second half result below that of last year.”
And it seems he can’t easily assess whether things will get better or stay tough as he pointed out that “we also have a number of significant trading periods across the balance of the year with forward visibility significantly reduced in these evolving sector dynamics.”
So what exactly happened in the 28 weeks to August 10? The company made a loss of £2.7m before tax/exceptional items and the new IFRS accounting standard. That compared to a profit on that basis of £25m a year ago. And the pre-tax loss was £23m, compared to £24.5m this time last year. That was even though group revenue fell only 0.7% to £303.8m (down 2.5% on a currency-neutral basis).
CEO Lindsay Page didn’t try to put a positive spin on all this. “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,” he said. “However, we are not immune to these pressures which have impacted our financial performance during the first half.”
Taking a closer look at the firm's figures, retail sales, including e-tail, fell 2.5% to £214.5m (+4.1% currency-neutral); UK and Europe retail sales fell 3.9% on an actual and currency-neutral basis to £141.3m; North America retail sales rose 3.1% at £63.7m but fell 3.9% currency-neutral; and Rest of World retail sales fell 15.2% to £9.5m (-7.2% currency-neutral).
E-commerce sales even dropped, a shock in a world where retailers usually manage to drive that figure higher and where Page had referred to that “accelerating channel shift towards e-commerce”. They were down 1.3% to £52.3m (-2.4% currency-neutral).
But wholesale rose 4% to £89.3m on the back of a footwear acquisition and was up 1.8% currency-neutral, although license income dropped 13.1% to £9.4m, but would have increased 2.8% without that change in the firm’s footwear ops.
The company has clearly been forced into the kind of promotional pricing that dents profits and chairman David Bernstein said H1 “trading conditions have been characterised by unprecedented and sustained levels of promotional activity across the sector with, in several cases, distressed discounting from brands and retailers and heightened competition.”
The group's performance was hit by these conditions and “amplified by heightened levels of consumer uncertainty across many of Ted Baker's global markets".
But there seems to have been a problem with something that was within the company’s control too — its product. “We also experienced some challenges with our spring/summer collections which we believe have been appropriately addressed as we move into autumn/winter,” Bernstein added.
On the plus side, the company signed a kidswear deal with Next during the period; created a joint venture in Greater China; and opened one new store in Detroit, plus its first German stores. Post-period-end it also appointed a new licence partner in Japan.
Lindsay Page may not have exactly been upbeat but he did highlight these positive developments as helping towards long-term growth, and also said that its AW19 collections “have been well received”.
There were some other positives too with the company saying it’s confident about the firm’s long-term prospects and a number of new product initiatives which went live in H1 “have already demonstrated success”.
These initiatives include monthly product drops in-store, online and to its wholesale partners and the launch of a shorter lead time design process. And its launch of ship-from-store “has proven highly successful in the UK” too.
All this may not have been enough to rescue the first half and probably won’t do much for H2 either, out the company seems to believe that it will reap the rewards further down the line.
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