Ted Baker revenue rises despite 'challenging' conditions, but profit drops
Fashion retailer Ted Baker posted a rise in interim revenue on Thursday as it benefited from a solid performance from its online segment despite ongoing challenging trading conditions, but profit dropped.
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In the 28 weeks to 11 August, profit before tax and exceptional items was up 3.5% to £25m, on revenue of £306m, up 3.5% on the same period a year ago.
However, reported pre-tax profit declined 3.2% to £24.5m as the company incurred exceptional costs of £600,000 related to debtor balances owed by House of Fraser which are no longer expected to be recovered following its entry into administration in August.
In addition, the company said its performance was hit by unseasonable weather across the UK and Europe and North America. Retail sales including e-commerce were up just 1.1% to £220.1m, while the gross margin fell 140 basis points to 64.2%.
Retail sales in the UK and Europe were 1% higher at £147.1m. In North America, retail sales rose 1.8% to £61.8m, while sales in the rest of the world fell 1.8% to £11.2m. Meanwhile, e-commerce sales jumped 24.1% to £53m.
During the half, the retailer opened two new stores in the UK, three new stores in the US, one new store in Spain, two new outlets in Germany and one new outlet in France.
Founder and chief executive Ray Kelvin said: "Ted Baker has continued to develop and expand as a global lifestyle brand across its markets and distribution channels despite challenging external trading conditions. This continued growth is testament to the strength of the Ted Baker brand, the design and quality of our collections as well as the dedication and talent of our teams.
"Whilst we believe that the second half of the year will remain challenging due to external factors, we are well positioned to continue Ted Baker's long-term development. Our flexible business model ensures that our customer has multiple channels to engage with Ted Baker and our global e-commerce business continues to expand, supported by our digital marketing strategy and unique stores that showcase the brand."
Lee Wild, head of equity strategy at Interactive Investor, said: "Like every other retailer, Ted Baker can’t change the weather, and it struggled to sell its threads to shoppers who preferred the beach to the high street. Ted was also caught out by the failure of House of Fraser. A 1.1% increase in retail sales and 140 basis-point decline in margin is hugely disappointing.
"Sales did keep growing, and should be positive for the full-year, despite Brexit and weak consumer confidence, but a decent Christmas will be crucial not just to Ted Baker, but to the entire retail sector.
"Ted Baker is a classy operator, but is not immune from the wider challenges affecting the retail sector. Double-digit growth at the wholesale business and prediction of high single-digit growth there is a positive, but these numbers do not inspire confidence."
Wild noted that Ted Baker shares lost more than a third of their value between March and August this year and are now at an historically significant level.
"Between 2,300p and 2,320p has proved either a major area of support or resistance during at least eight periods since 2014. Dropping back below that level in early trade is a bad sign."
George Salmon, equity analyst at Hargreaves Lansdown, said: "To be fair to Ted Baker, its troubles aren’t all of its own making. Stock sold to House of Fraser prior to the department store being unceremoniously hauled aboard a Sports Direct lifeboat has been written off, while the cold weather earlier in the year has also impacted sales. It’s hard to shift spring lines when the mercury is freezing.
"The group is clearly up against it for the rest of the year, and this will dampen investors’ spirits. However, Ted has delivered excellent results for shareholders over the last 10 years, and this track record shouldn’t be discounted just yet. Still, to make the next decade just as strong, improvements are needed sharpish.”
At 1035 BST, the shares were down 10% to 2,070p.