Ted Baker PLC (LON:TED) shares plunged on Tuesday as the fashion retailer said it expects its annual profits to drop by as much as 20% after difficult trading in the year to date.
The FTSE 250-listed group said its revenue fell by 1.1% on a reported basis, or was down 2.9% at constant currency, in the 19 weeks to June 8.
Retail revenue dropped 1.1% and wholesale sales declined 1.2%. At constant exchange rates, retail and wholesale revenue fell 2.6% and 3.6%, respectively.
READ: Ted Baker announces new CEO to replace Ray Kelvin and overhaul of policies after "forced hugging" claims
The group blamed weaker trading on unseasonable weather in North America and a highly promotional retail environment across its global markets, which led to lower gross margins.
Acquisition lifts revenue but squeezed margins to hit full-year profits
In January, Ted Baker completed the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA – the registered names for the companies producing its footwear – for £13mln.
Including the deal to buy back its footwear licence back from Pentland Group after 17 years, total revenue rose 3.8% in the year to date, or 1.9% at constant currency.
Wholesale revenue jumped 14.2% or 11.4% at constant currency. However, retail revenue still fell 0.3% or 1.8% at constant currency.
Ted Baker said it expects tough trading conditions to persist for the rest of the financial year.
It estimates underlying pre-tax profit for the year ending 25 January 2020 will fall between the range of £50mln and £60mln, compared to £63mln a year ago.
Ted Baker takes action to offset poor trading
To mitigate poor sales, the company said it will control costs, introduce new products and improve efficiency through its sourcing and supply chain.
“As a team, we are proactively addressing the challenges we face as an industry,” said chief executive Lindsay Page.
“Several of our new product initiatives will commence imminently and we are confident in our collections for the coming season.”
“We are relentlessly focused on achieving cost efficiencies as well as further cost savings throughout the business.”
In April, Page was promoted from the role of finance director to chief executive. He took over from founder Ray Kelvin, who stepped down following allegations of sexual harassment including claims of “forced hugging” and “ear kissing” of employees.
Following an investigation into the claims, Ted Baker said it would make changes to improve its policies and procedures.
In early morning trading, Ted Baker shares were 25.5% lower at 1,003p.
-- Adds share price --