Hope for Ted Baker

Despite the difficulties the company has faced, the relevance of this luxury brand seems to have remained intact, which has enabled some light to be seen at the end of the tunnel.

Article updated: 7 September 2021 8:00am Author: Richard Hunter

Ted Baker will rarely face the tribulations of the past couple of years again, with the dual impact of Covid-19 and an aggressive transformation plan requiring a significant overhaul of the business.

Cash raising exercises and cost cutting have helped to revitalise the balance sheet, such as the sale of its head office resulting in annual rental savings of £3.3 million.

Perhaps the most promising news from the update is the group’s improvement to the full price mix. In the corresponding period last year, an overhang of stock needed to be sold at a discount. This time around better stock control and fewer sale stickers have improved trading margin by over 5%, with the momentum of group sales growth of 50% spilling over into current trading, after the period which these results cover.

Retail sales have improved by 30% over last year and store sales by 142%, although these remain down on pre-pandemic levels by 30% and 45% respectively. The lack of international tourism has also affected the travel business, while footfall to the high street is still constrained as shoppers prefer the out of town experience, which does not play into the group’s hands.

The company has also decided that the new online platform is not yet quite fit for purpose, and has delayed its launch until early next year. In the meantime, Ted has stated that this will not have a material impact on business as usual, although this element of the business remains disappointing given competitive pressure elsewhere.

Ted Baker represents an absolute recovery play, bringing a much higher risk for investors. There are, however, some real signs of progress and while the retail arena remains one of fickle fashion tastes and highly competitive pricing, Ted’s position in the luxury space could yet be its saviour.

The shares have has a good run leading up to these numbers and are ahead by 47% over the last year, as compared to a gain of 25% for the wider FTSE All Share. However, to put matters into perspective, the shares remain down by 92% over the last three years, a sobering reminder of the work to be done. The limited market consensus of the shares as a strong buy is likely predicated on a strong return to form, or even some speculation that the company could be subject to a takeover approach at current levels.

More from Richard Hunter: read more articles directly on the interactive investor website.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Richard Hunter

Head of Markets, interactive investor

Richard has over 30 years of stockmarket experience and is one of the UK’s foremost commentators on market matters and a regular contributor for the BBC (BBC News Channel, Wake Up to Money and the Today Programme), CNBC and Bloomberg. Richard’s expert commentary also appears across the national and specialist press. He previously held senior positions at Hargreaves Lansdown and NatWest Stockbrokers.

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