Ted Baker warns of hit to profits from additional costs

Ted Baker has warned that its profits will fall short of market expectations this year due to foreign exchange movements and additional costs.

The company said pre-tax profits for the financial year ended 26 January 2019 are now expected to be £63m, compared with consensus estimates of £73.8m. Shares in the company plunged by 17% in early trading on Wednesday.

Foreign exchange movements have affected profit by around £2.5m, primarily due to the change in the pound’s value versus the dollar and euro.

Upgrades to the group’s systems have also cost approximately £2.5m, while transitions in Asia and the US resulted in a £5m write-down in the value of inventory stock.

The adjusted profit estimate does not include previously announced costs associated with the investigation into the behaviour of the brand’s founder, Ray Kelvin, the collapse of House of Fraser, or the acquisition of footwear brand No Ordinary Shoes. The full results will be announced in March.

Investors had feared that negative publicity surrounding harassment allegations against Kelvin would hit the brand’s sales. But Ted Baker’s post-Christmas update in January showed strong growth, with sales up 12.2%.

The group is currently being led by acting chief executive Lindsay Page, who has taken on the role while Kelvin is on an indefinite leave of absence.

In January, the company said an independent investigation, led by law firm Herbert Smith Freehills, was “progressing” and a further update will be given in due course.

It capped off a turbulent year for Ted Baker, which has also had to contend with declining consumer confidence in several markets and the fallout from House of Fraser’s collapse in the UK.