Ted Baker plc (LON:TED) chief executive Lindsay Page has resigned after a black hole was found in the company’s accounts and as it suspended the dividend and warned that profits could fall 90% this year.
The fashion chain has also parted company with executive chairman David Bernstein, who has been at the company since 2003 and chairman since 2013.
Page, who was promoted to CEO in April after 22 years as finance chief, has been replaced after eight months by chief financial officer Rachel Osborne as acting CEO.
Earlier this month, Osborne, had in her first few weeks in the job discovered that the value of inventory held on the company’s balance sheet has been overstated by £20-25mln.
In a trio of grim statements on Tuesday, a day earlier than a planned update, the company also revealed disappointing trading over November and the Black Friday period and said it anticipated that “difficult trading conditions will continue”, but made no mention of the inventory issue or the legal and accounting reviews that were launched last week.
Full-year expectations have been slashed to a minimum profit before tax of £5mln, representing around a 90% fall from the £50.9mln last year, though PBT could potentially be as high as £10mln, depending on Christmas trading and a final year-end review.
Dividend payments have been suspended and the board said it was "taking the necessary immediate actions to address underperformance and improve efficiencies across the wider group and are confident that these will return the group to a stronger position".
As well as the ongoing investigation by external accountants and lawyers of the accounting issue and a review of assets that was begun in October, Osborne has now retained a consultancy firm to conduct a total review of costs and the business model.
Non-executive director Sharon Baylay has been promoted to chair of the board until a permanent successor is appointed.
Ted Baker shares, already down considerably this year, plummeted sharply in early trading on Tuesday below 260p for the first time since the financial crisis, before coming back. By mid-morning they were down 11% at 354p.
This trading update had been much-awaited, said retail sector analyst Nick Bubb, and it has been brought forward by one day “because it is dreadful”.
“Shareholders may take some comfort from the fact that the newly installed CFO, Rachel Osborne, has been installed as CEO," Bubb added.
“If the founder Ray Kelvin has been waiting for more bad news like this before launching his much-expected rescue bid then he has been wise".
Broker Liberum said the departures of Page and Bernstein “are both signals that swift action is being taken”.
“We do believe TED remains a strong brand going through its worst year but as with all periods of pain, if the right decisions are made then it could come out of this a much better business.”
Sophie Lund-Yates at Hargreaves Lansdown noted that discounting was squeezing the wider retail sector, not helped by the Black Friday sales period.
“That’s hurting Ted’s gross margin and has left profits unravelling, and the higher price tags on Ted’s clothes means it’s more vulnerable to price-slashing than some rivals.
“We think Ted Baker’s brand still has legs, with digital sales in North America growing comfortably. The fact remains though the UK and Europe are putting the brakes on overall group performance, and weak consumer spending isn’t showing signs of strengthening yet. Ted isn’t down and out at this point, but further blows can’t be discounted.”
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