Quirky British fashion brand Ted Baker (TED) tumbles 3.8% to £22.96 on the news sales growth slowed to a mere 4.2% in the 19 weeks to 9 June, while some investors may be anticipating further profit downgrades ahead.

Ted Baker founder and CEO Ray Kelvin blames ongoing challenging ‘external trading conditions’ and the poor weather across Europe and America’s East Coast in the early part of the period for the retailer’s subdued sales showing in what is roughly the company’s first quarter. The extent of today’s share price decline is moderated by the fact these headwinds had already been flagged at the full year results.

Back in March, forecasts for Ted Baker were downgraded after the quintessentially British fashion label warned trading conditions ‘will remain challenging across many of our global markets’ and bemoaned ‘the recent unseasonal weather’ in Europe and across the pond and its dampening effect on demand for its Spring/Summer collections.

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RETAIL SALES SLOWDOWN

Today, Ted Baker reports total retail sales (including e-commerce) growth slowed to just 0.7% for the 19 week period, although thankfully, the increasingly important e-commerce channel grew by 33.6%. Wholesale revenues shot up 14.2%, thanks to a good showing from Ted’s UK and North American businesses and the earlier timing of wholesale deliveries.

‘Our product and territorial licensees continued to perform well,’ insists Ted Baker, ‘reflecting the global strength and appeal of the brand. We are pleased with the performance of our product licences with notable performances from Childrenswear, Eyewear, Lingerie and Suiting.’

Ted Baker insists that ‘underpinned by the strength and the appeal of the Ted Baker brand and our balanced business model, the group remains focussed on delivering the board's expectations for the full year’ ahead of interim results due in early October.

Ted Baker St Pancras Store

THE ANALYSTS’ VIEW

Paul Hickman, analyst at Edison Investment Research, argues that ‘as the 19 week period 28 January-9 June (roughly the company’s first quarter) covered the Artic spring in the UK, Europe and the US East Coast, to have achieved 7.5% constant currency revenue growth in the period seems quite an achievement.’

Hickman adds: ‘However, underlying this overall positive result is Ted’s helpful spread of risk - between retail wholesale and licensing income on one dimension, and between geographies on another. That spread of risk, together with the brand’s unique aspirational lifestyle appeal, keeps the company on the right side of the cautious selection criteria investors need to apply to the retail sector.'

Liberum Capital remains a buyer with a £33 price target, arguing ‘the balance of Ted Baker’s performance is a testament to the strength of its model’ and that ‘the strength in e-commerce, Wholesale and Licensing has helped offset some of the Retail store pressure and this would not be possible but for the strength of the brand.'


Issue Date: 12 Jun 2018