Ted Baker looks to raise £95m in share placing as profits slump
Ted Baker is seeking to raise £95m in a share placing after reporting a slump in underlying profits before tax from £63m to £4.8m in the year to 26 January 2020.
The premium fashion and lifestyle brand had swung to a £79.9m loss before tax compared to a profit of £30.7m last year as it was hit by £84.6m of non-underlying expenses, mainly comprising total charges of £45.8m related to inventory, £16.2m related to impairment of store assets, £7.6m related to losses on the disposal of its Asian business and £6.5m for legal and professional costs.
Total revenue was down 1.4% to £630.5m, (down 2.4% in constant currency) impacted by significant discounting, particularly in the UK, in response to weak consumer spending and channel shift to online, it said.
Retail revenues fell 4.6% (fell 5.4% in constant currency) to £439.9m comprising store store revenues down 5.3% (down 6.3% in constant currency) to £321.2m and e-commerce revenues down 2.5% (down 3.1% in constant currency) to £118.7m.
Wholesale revenues increased by 9.6% (up 8.1% in constant currency) to £171.5m, benefitting from incremental footwear revenue. On a comparable basis (excluding footwear), wholesale revenues decreased 3.7% (decrease of 5.0% in constant currency) due to "challenging trading conditions for trustees and territorial franchise partners".
Licence revenues decreased 14.1% to £19.0m. Underlying licence income increased 1.8%, adjusting for the company's acquisition of its footwear licence, which it bought back from Pentland in September 2018.
The results are the culmination of a tumultuous year for Ted Baker in which its founder and CEO Ray Kelvin was obliged to stand down due to staff harassment allegations, which he denied, followed by the departure of former COO and Kelvin's replacement as CEO Lindsay Page and chairman David Bernstein, after a string of profits warnings.
Former Debenhams CFO Rachel Osborne had been brought into the business as CFO and stepped up to act as CEO, a role which has now become permanent. A new chairman, former Next chair John Barton, has been appointed and it recently announced that Topshop's Anthony Cuthbertson would be joining the business as global creative director.
"The board recognises that last year's performance was disappointing for all of Ted Baker's stakeholders, reflecting a challenging external environment as well as significant internal disruption, driven by a number of senior leadership departures," the company said in a statement.
To address the issues it has announced "Ted's Growth Formula" to get the business back on track; a transformation plan that will be funded by the £95m share placing, which is also designed to help it navigate the COVID-19 crisis.
The plan covers three areas: "Stabilising the company's foundations"; "Growth drivers"; and "Operational" excellence. Ted Baker said that its plans should lead to a more profitable business running on a lower cost base.
Ted Baker said trading has been “significantly impacted” by the coronavirus pandemic in the latest period, with sales falling by more than a third.
Company revenues slid 36% for the 14 weeks from 26 January to 2 May, as it was impacted by temporary store closures.
Online retail sales jumped 50% over the period, with a 78% rise in the six weeks from 22 March, it said.
The company said it will increase its focus on online operations and has also secured £138.4 million in savings through a recent cost-cutting programme.
Osborne said: “Today we are excited to launch Ted’s Formula for Growth, a comprehensive strategy for the Ted Baker brand which is supported by a significant recapitalisation of the business, that strengthens our position and enables us to both execute that transformation, and navigate through the disruption caused by Covid-19.
“The Ted Baker brand is much loved, it has a unique personality and character built up over many decades, and that provides us with a remarkably strong foundation from which to continue our international growth.
“Over the past six months, our new executive team have pulled together and undertaken a thorough review of the business, identified key opportunities and acted decisively in a number of areas.”