Ted Baker PLC (LON:TED) was in need of a hug on Thursday after the UK fashion house reported a 26% fall in annual profits, just two weeks after its founder and chief executive quit amid allegations of “misconduct”.
The FTSE 250 clothes maker and retailer said Brexit uncertainty, “competitive discounting” across the retail sector and the Great British weather were to blame as profits plunged to £50.9mln in the 12 months ended 26 January, down from £68.8mln a year earlier.
READ: Ted Baker CEO and founder resigns after harassment claims
Those issues hammered margins, which slumped to 58.3% (2018: 61.0%), more than offsetting the 4.4% rise in revenue to £617.4mln (2018: £591.7mln).
House of Fraser’s collapse dented profits by £0.6mln while the investigation into Ray Kelvin’s alleged misconduct, which included reports of “forced hugs” and ear kissing, has so far cost £1.1mln.
Ted Baker was also forced to write down the value of 13 underperforming stores around the world by a total of £8.7mln.
No let-up in sight
Margins have remained under pressure at the start of the new financial year, too, with the company claiming that promotional activity has continued to rise, not just in the UK, but also abroad.
It added that consumer uncertainty and unseasonal weather, particularly in North America, continue to impact trading as well.
Unsurprisingly, the board, led by acting chief executive Lindsay Page, has moved to trim the final dividend to 40.7p per share (2018: 43.5p). That takes the total payout for the year to 56.8p – a decrease of 2.5% (2018: 60.1p).
Boss praises ‘resilient’ sales performance
“Ted Baker has continued to grow across each of the brand's distribution channels despite difficult trading conditions across a number of the group's global markets,” said acting CEO Page.
“This resilient sales performance again reflects the strength of the brand, the talent of our teams, and the quality of our collections.”
He added: “We are excited by our Spring/Summer collections and the Board remains focussed on identifying opportunities in the evolving retail market to further expand the brand.”
Liberum slashes price target
City broker Liberum has slashed its price target for Ted Baker to 2,300p (from 2,800p) and cut its forecasts to reflect what it reckons is a “tougher backdrop in the UK and Europe”.
“Given the early stage in the year, this is a cautious view but the right one,” read the note to clients.
“The current trading environment is best described as heightened promotional activity with retailer’s dealing with the combination of cyclical and structural forces impacting at the same time.”
For the current year – FY20 – Liberum now expects Ted to report an adjusted pre-tax profit of £70.7mln on revenue of £631.1mln. That's down from its previous estimates of £81.8mln and £672.5mln respectively.
In afternoon trading, Ted Baker shares were down over 7% at 1,589p.
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