Proactive Investors - Run By Investors For Investors

Ted Baker shares slip on downgrade by RBC analysts

RBC downgraded its recommendation on Ted Baker’s shares to ‘sector perform’ from ‘outperform’ and slashed its target price to 900p from 1,900p
Ted baker
RBC said steep markdowns raise questions around Ted Baker's pricing structure

Ted Baker PLC’s (LON:TED) growth prospects have largely dissipated due to a difficult premium apparel market and the company’s disconnect between price and brand, analysts at RBC Capital Markets said.  

RBC downgraded its recommendation for Ted Baker’s shares to ‘sector perform’ from ‘outperform’ and slashed its target price to 900p from 1,900p, citing a lack of catalysts.

READ: Ted Baker expects profits to fall as much by as 20% after difficult trading

The broker pointed out that the fashion retailer has marked down more items than its peers, suggesting that the full price offer is not resonating with customers. That partly reflects “higher fashion content” but raises questions around its apparel pricing structure in the longer term, RBC said.

RBC revised its estimates for the 2020 fiscal year lower, cutting revenue by 2%, gross profit by 6% and pre-tax profit by 30%.  The broker also reduced forecasts for 2021 to 2022.

Risk of lower dividend 

It also thinks there is a risk the dividend could be lowered in 2020.

“Despite a positive free cash flow forecast for fiscal year 2020 (£17mln), most dividend scenarios result in a slight net debt increase, which may lead management towards a payout within the historical 50-60% range (vs 64% in FY19), resulting in lower dividend per share (47p per share on our estimates),” RBC said.

The broker added that potential bid approaches could provide some support to the share price but it does not expect a re-rating or Ted Baker's majority shareholders to positively appraise any offers at trough valuation given its shares are down 47% in the year to date.

In Wednesday’s late morning trading, Ted Baker shares were down 1.4% to 795.70p.

View full TED profile View Profile

Ted Baker Timeline

Related Articles

H&T
May 21 2019
H&T investing in digital offeringProfits gain in 2018Outlook upbeat as strategy pays off
drainpipes
May 23 2019
Company is looking for more acquisitions after integration of Metro Rod
medical imaging graphic
June 13 2019
Here we take a closer look at the imaging and diagnostics firm IQ-AI

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use