Ted Baker may have overstated inventory to tune of £25m
Ted Baker shares nosedived on Monday after the company issued a surprise statement saying it had overstated its inventory to the tune of tens of millions of pounds.
The company said the value of the stock on its balance sheet was overstated by a figure between £20 million and £25 million. It added that the figures are based on preliminary analysis, although it assured us that “any adjustment to inventory value will have no cash impact and will relate to prior years”.
That didn’t placate investors and the company saw its share price falling from the 395p a share it closed at on Friday to 340p in early trading. However, it has recovered some ground since then and was back at 358p 45 minutes later. Nonetheless, that figure is still almost 10% down from Friday’s close and nowhere need the heady 2,120p each share cost as recently as January.
The share price may not seem hugely important if you’re not a shareholder, but it reflects investors’ lack of confidence in the firm and also means it has a fairly low market capitalisation of just over £163 million rather than a figure closer to £1 billion at the start of this year.
So what happens now? The company, which is due to issue a trading update on December 9, has appointed law firm Freshfields Bruckhaus Deringer LLP, and will be appointing independent accountants, “to undertake a comprehensive review of this issue”. They will report to a sub-committee, chaired by independent director Sharon Baylay.
Ted Baker also said it’s “committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate. Whilst the review is ongoing, the company will not comment further”.
Steve Miley, a senior market analyst at asktraders.com, said: "Ted Baker needs to clean up its act," but added that "it’s worth noting these issues relate to a time when Ray Kelvin was at the helm".
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