RBC Capital downgrades Ted Baker, slashes price target

RBC Capital Markets downgraded its stance on Ted Baker shares to 'sector perform' from 'outperform' and slashed the price target to 900p from 1,900p as it highlighted a lack of catalysts.

The Canadian bank said growth is likely to remain elusive at the fashion retailer, as its price/brand proposition is stretched, evidenced by the breadth of markdowns in the most recent spring/summer sale versus peers.

It noted that the company has marked down 70% of polo shirts, 70% of shirts, 60% of blazers at average discount levels of 35%/40%/ 40%, respectively. "This suggests the full price offer is not resonating with consumers, partly reflecting higher fashion content, but raises questions around its apparel pricing architecture longer term," it said.

RBC said its revised estimates for pre-tax profit are 20% below consensus for 2020 and 2021, which will likely adjust in time.

It said valuation is a supporting factor in Ted Baker's equity story. "However, we do not anticipate a sustained re-rating given investor apathy towards premium apparel and UK exposure at this point in the cycle."

At 1055 BST, the shares were down 1.1% at 799p.