Ted Baker PLC (LON:TED) defied a high street downturn to deliver a 3.5% rise in first-half revenue but warned that the rest of the year would remain “challenging”.
Shares plunged 13.9% to 1,987p in morning trading. The British fashion retailer posted revenue of £306.0mln for the six months to August 11, compared to £295.7mln a year ago, supported by its expansion plan.
The company opened two stores in the UK, three stores in the US and one in Spain along with two new outlets in Germany and one outlet in France. It also opened further concessions in 10 department stores across the UK, Europe and North America.
But pre-tax profit dipped 3.2% to £24.5mln from $25.3mln last year, reflecting costs related to the expansion and a one-off £0.6mln hit from debts owed by troubled department store chain House of Fraser, where Ted Baker has concessions.
Sports Direct International PLC (LON:SPD) took over House of Fraser just hours after the chain went into administration in August with debts of close to £1bn.
Ted Baker said it does not expect to recover the money it is owed from House of Fraser's administrators.
READ: Sports Direct dismisses House of Fraser directors and management
Excluding exceptional items, Ted Baker's pre-tax profit rose 3.5% to £25.0mln from £24.2mln.
Beast from the East and hot summer hits sales
Ted Baker said it delivered sales growth despite the impact of the so-called Beast from the East, which brought heavy snowfall and icy temperatures earlier in the year, followed by an unusually hot summer.
Like the rest of the retail sector, the group also had to contend with weaker consumer confidence and online competition.
Retail sales, including e-commerce, grew 1.1% to £220.1mln with 1.0% growth in the UK and a 1.8% increase in the US offsetting a 1.8% decline in the rest of the world.
Wholesale sales increased 10.1% to £85.9mln and licence income grew 11.7% to £10.9mln.
The interim dividend was raised 7.8% to 17.9p from 16.6p a year ago.
“Whilst we believe that the second half of the year will remain challenging due to external factors, we are well positioned to continue Ted Baker's long-term development,” said founder and chief executive, Ray Kelvin.
"Our flexible business model ensures that our customer has multiple channels to engage with Ted Baker and our global e-commerce business continues to expand, supported by our digital marketing strategy and unique stores that showcase the brand."
Liberum cuts target price as revenue misses forecast
Liberum maintained a 'buy' rating but cut its target price to 3,100p from 3,300p.
It said: "Revenues are lower than we had hoped, but a variable cost model, management’s forward planning and the ability to flex sales through channels, have combined to deliver a commendable result.
"Comparatives ease in H2 vs. H1, but this aside, issues with trading partners are likely to remain and the market will remain tough meaning gross margin gains from last year will reverse."