Ted Baker PLC (LON:TED) shares edged higher on Wednesday after the fashion brand unveiled a new Chinese joint venture.
Alongside its partners LongGoal and Infra, the plan is to open up to 50 new Ted Baker stores in China, Hong Kong and Macau over the next five years, on top of the nine that are already trading there.
Bosses said the combination of the company’s buying and brand-building power with its partners’ local knowledge and expertise, would help it to realise the “significant growth potential” in the Chinese market.
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“We are very excited about the next stage in the growth of Ted Baker across the significant Chinese market,” said Lindsay Page, who is acting chief executive following Ray Kelvin’s departure earlier this year.
“Over recent years we have invested in introducing the Ted Baker brand to Chinese customers, and we are confident that the creation of this JV will build on this platform and deliver meaningful long-term growth.”
In return for a 50% stake in Ted Baker Hong Kong, the company is issuing £5.7mln worth of shares to LongGoal and Infra. The firm’s net cash contribution is expected to be around £3.4mln.
The deal is expected to complete in late-summer, while it should also be “marginally” earnings enhancing in the current financial year.
‘Exciting and ambitious’, says Liberum
“The formation of a JV to target the Chinese market is an exciting venture which provides the adequate expertise to lay down a strong business in this market,” said analysts at Liberum, who repeated their ‘buy’ recommendation and 2,300p price target.
“The growth is ambitious targeting a potential 50 stores in 5 years but together with two very credible partners with a track record of bringing Western Brand to the Chinese markets, seems a very sensible move.
They concluded: “We view this deal as sensible and yet again proves that the Ted Baker brand is delivering on its global ambitions in a relatively capital light, risk-free manner.”
Ted shares rose 1.5% to 1,492p on Wednesday.