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Ted Baker unveils full year profit and sales growth but highlights market challenges

Last updated: 14:30 23 Mar 2017 GMT, First published: 08:00 23 Mar 2017 GMT

Ted Baker
Ted Baker

British fashion label Ted Baker plc (LON:TED) lifted its dividend 12.1% as full year profit rose on the back of sales growth in its domestic and international businesses.

Profit before tax rose 4.4% to £61.3ln in the year to 28 January, compared to £58.7mln the prior year. Revenue rose 16.4% to £531.0mln from £456.2mln as the clothing chain continued to expand globally.

Sales in the UK and Europe rose 10.7% to £279.5mln while sales in the US and Canada jumped 28.3% to £103.4mln. E-commerce sales were 35.1% higher to £72.3mln and wholesale sales grew 20.9% to £130.3mln. Licence income edged up 26.8% to £18.2mln.

Ted Baker said sales were supported by higher margins, which rose to 61.0% from 59.9%, boosted by a pick-up in full price sell-through in retail, an improved mix of wholesale sales to trustee customers and foreign exchange tailwinds.  

The group proposed a final dividend of 38.8p, bringing the total dividend to 53.6p, compared to 47.8p a year earlier.

"This success reflects the strength and appeal of the brand as well as the outstanding quality of our collections," said founder and chief executive Ray Kelvin. 

"Our Spring/Summer collections have been well received and we have a clear strategy for continued growth across both established and newer markets. This is underpinned by controlled distribution across channels as well as the design, quality and attention to detail that are at the core of everything we do."

However, shares fell 6.27% to 2,662.0p in afternoon trading as the company highlighted cost pressures facing retailers in the year ahead.

Ted's costs rise...

Acknowledging the impact of rising inflation, Ted Baker said trading across its markets continues to be hit by ongoing external factors.

Analysts also highlighted Ted Baker booked a £2.9mln provision for lease commitments relating to legacy warehouses and incurred £0.9m in costs for  shutting  a concept store in London as well as £0.7m for other closure costs.

The group also saw distribution costs rise 22.7% to £208.2mln, reflecting costs from a new European distribution centre and some store pre-opening costs in North America.

Peel Hunt said: "Ted has announced fiscal year 2017 pre-tax profit broadly in line with expectations, up 12.1% year-on-year While ‘broadly in line’ may be code for ‘slightly below’, it should be noted that Ted has also incurred one-off costs from warehouse double running and US pre-openings of £6m, taken above the line, which has softened what otherwise would have been another 20% growth year."

Expansion plans

The company plans to invest in expansion with a new store in Oxford and in Paris, an outlet in Gloucester and its first Dutch outlet in Roermond. In North America ,Ted Baker will open stores in Los Angeles, Houston and relocate its Miami Aventura store.

To fund the expansion, capital expenditure in the new financial period is planned at £35.0mln, compared to £43.8mln in 2017.

“Ted Baker's business model, as well as the strength of the brand and collections, support our confidence in the group's continued development and further growth,” the company said. 

Liberum reiterated a 'buy' rating and target price of 3,100p, saying pre-tax profit was ahead of its forecasts and Ted Baker remains one of its top picks in the sector.

"Despite ongoing headwinds across the company's global markets Ted has a resilience born of a strong brand, strong and stable underlying operating margins and global growth opportunities," the broker said.

 

-- Adds broker comments, updates share price --

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