Ted Baker PLC (LON:TED) has confirmed the appointment of law firm Herbert Smith Freehills to conduct an investigation into claims its boss Ray Kelvin forced hugs and kisses on employees.
The fashion retailer made the announcement as it reported a 0.2% decline in revenue for the 16 weeks to December 1 as lower wholesale sales offset growth in retail sales. At constant exchange rates, sales fell 0.4%.
READ: Ted Baker launches investigation after staff hugging and harassment claims
Wholesale sales dropped 6.5% on a reported basis or 7.0% at constant currency due to the earlier timing of deliveries in the first half of the year. The company still expects mid to high single-digit growth at constant currency in wholesale sales for the full year.
Retail sales in the 16-week period grew 2.3% at actual exchange rates or 2.1% at constant rates, supported by store expansion and e-commerce sales. The average retail space increased by 5.2% to 427,586 sq ft while online sales jumped 18%, representing 30.3% of total retail sales.
In the last eight weeks of the period, retail sales rose 4% as the weather became “more typical” for the season after an unusually warm summer.
Retail and wholesale gross margins were in line with expectations, the company said.
Ted Baker 'mindful' of challenging markets
Ted Baker added that it remains “mindful” of the challenging markets in which it operates and is focused on making further progress for the financial year.
The group’s founder and chief executive, Kelvin, has been accused of forced hugging, making sexual innuendoes, stroking and kissing people’s necks and ears in a petition launched by Ted Baker staff, which has more than 2,000 signatures.
The fashion retailer has said hugs are "part of Ted Baker's culture, but are absolutely not insisted upon".
On Monday, the group vowed an independent external investigation in the allegations.
Ted Baker brief on allegations against boss
In Thursday’s trading update, the company said it had appointed Herbert Smith to conduct the probe but did not comment any further on the matter.
Commenting on trading, Kelvin said: "We are pleased with the brand's continued expansion, which is a reflection of the strength of the Ted Baker brand and the design and quality of our collections.
“The investment in our flexible business model ensures that the Ted customer has multiple channels to engage with the brand and underpins our long-term development. Our global e-commerce business continues to grow well and is complemented by our digital marketing strategy and unique stores that showcase the brand."
Ted Baker plans to release its next trading statement covering the key Christmas period from December 2 to January 5 in mid-January 2019.
Shares rose 4.5% to 1,533p in morning trading.
George Salmon, equity analyst at Hargreaves Lansdown, said: “Even before the accusations around the conduct of Ray Kelvin emerged, Ted was facing a cocktail of challenges. UK department stores, a key sales outlet for Ted, are under pressure, while conditions aren’t much better across markets in the rest of the world."
He added: The timing of the claims is disrupting the all-important Christmas season, but the potential impact stretches beyond these next few weeks. The scandal engulfing Mr Kelvin damages the Ted brand and raises questions over the future leadership of the business, which has hitherto delivered consistent profit and dividend growth. That makes the findings of the independent investigation crucial.”