A better-than-expected Christmas trading update from Ted Baker PLC (LON:TED) has prompted HSBC to upgrade its recommendation on the stock to ‘buy’ from ‘hold’ and raise its target price to 2,215p from 1,450p.
The fashion retailer on Wednesday reported a 10.5% increase in retail sales at constant currency for the five weeks to January 5, compared to consensus expectations of 6% growth for the fourth quarter following a 2.1% rise in the third quarter.
“While this update needs to be considered in the right context, i.e. this is a short trading period (five weeks to 5 January) and coincides with a rebound in UK consumer demand, it also underpins the resilience of Ted Baker’s brand appeal during peak trading,” HSBC said.
HSBC added that there appears to be "no discernible impact" on brand performance or reputation following reports of sexual harassment claims against chief executive and founder, Ray Kelvin. Kelvin has taken a voluntary leave of absence while the allegations are investigated by law firm Herbert Smith Freehills.
However, the bank cut its estimates for pre-tax profit in fiscal years 2019 to 2021 by 4-8% to reflect challenging UK trading conditions.
Shares in Ted Baker fell 6.8% to 1,975p in mid-morning trading.
Meanwhile, Goldman Sachs has taken a different view on Ted Baker, downgrading the stock to ‘neutral’.