Ted Baker PLC (LON:TED) is turning its Japanese business over to a licence model, saying this should nudge up profit this year and deliver an “acceleration in performance” in future.
In an initial five-year deal, the FTSE 250 fashion brand will transfer the five stores in Japan that it has been running itself to a subsidiary of Tokyo-listed Sojitz Corporation that already handles more than 300 shops and concessions for other brands.
The deal, which completes the reorganisation of Ted Baker's Asian operations after recent changes in China, will bring around £3mln of cash and £1mln non-cash charges for the group as assets and leases are transferred to Sojitz, also incurring costs and restructuring charges.
But profit in the current year is expected to be marginally accretive to group pre-tax profit in the current financial year and leads to increased positive impacts during the subsequent years of the contract.
“We are very excited about the next stage of growth for the Ted Baker brand in Japan,” said chief executive Lindsay Page.
“Over recent years, we have invested in introducing Ted Baker to Japanese customers and we are confident that our new Japanese retail licence partner will build on this platform and deliver meaningful long-term growth.”
Page, who was appointed last year in the wake of the “forced hugging” row involving former boss Ray Kelvin, said Sojitz will add “local market expertise” to Ted Baker’s design, buying and merchandising skillset.
“This combination will drive an acceleration in performance of the business. We firmly believe that Japan has the long-term potential to be an important market for the Ted Baker brand.”
Broker Liberum said the deal was "sensible" and suggested it "highlights both management’s ambition and the long-term opportunity that lies ahead for TED to continue growing through relatively capital light and lower risk channels".
Analysts at Peel Hunt were of a similar mind, observing Ted’s "Asian penetration remains fairly low" and expressing the belief that this and the Chinese joint venture agreement "will serve to accelerate the brand’s expansion into Asia, providing the opportunity for meaningful growth over the medium term".
Shares in the company were up 1.3% to 923.5p on Wednesday morning.