Nov 16, 2017
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E-tail and wholesale prove winners for Ted Baker in "challenging conditions"

Nov 16, 2017

We’ve heard a lot in recent weeks about how tough UK fashion retail was last month and in early November. But apart from John Lewis’s weekly updates, most of the evidence so far has shown us that already-weak retailers continued to suffer while nimble e-tail newcomers have continued to power ahead.

Ted Baker

But on Thursday, Ted Baker issued a trading update and this was key because what we have here is an undeniably powerful store-based business telling us just how tough (or not) it is at the moment.

How did the company fare in the 13 weeks to November 11? Pretty well in the circumstances, but even a business as strong as this showed signs of a slowdown in the face of “challenging conditions.”

Let’s look at the details. The company said that group revenue rose 7.3% or 8% currency-neutral from mid-August up until last weekend.

Retail sales for the period increased by 4.6% (5.1% currency-neutral).  But that growth came along with a 5.6% expansion of average retail square footage so it’s clear that physical store sales growth is being driven by new space rather than by it boosting sales at existing locations. 

The challenges the company referred seem to be making an impact, although it was frustrating that the trading statement didn’t dive very deep into how trading varied throughout the period. 

It did say that “the reactions to our autumn/winter collections have been positive,” yet we don’t know specifically whether Ted Baker saw the same October decline as many other UK retailers suffered.

However, we can make a good guess given that it also said its performance "was achieved despite continued challenging external trading conditions across some of [our] global markets, most notably in October.”

Should this set off alarm bells? Probably not. Ted Baker is a resilient business that has shown itself able to navigate its way through tough retail periods before.

And it had great news on the e-tail front, showing that, despite being largely store-based, this business knows how to make the most of omnichannel opportunities.

The brand’s e-tail sales continued to soar with a 30.5% increase (31.3% currency-neutral) that saw digital making up 19.2% of its total retail turnover. Any business that can battle current consumer physical store by firing on all cylinders online is definitely in a powerful position. 

And wholesale proved strong too, rising 14.2% (15.4% currency-neutral) “reflecting good performances from both our UK and North American businesses”. With both those markets struggling this season, that’s another piece of good news to add to Ted Baker’s ‘plus’ column.

The company now anticipates low double-digit wholesale turnover growth on a currency-neutral basis for the full year and said both retail and wholesale gross margins were in line with its expectations in the latest period.

It added that product and territorial licensees were still growing with further licensed store openings in Kuwait and Qatar.

CEO Ray Kelvin said of it all that “the business has continued to perform well and develop in line with our expectations. The group's continued growth in the period, despite challenging trading conditions across some of our global markets, has again been underpinned by our business model.”

He added that full-year results “will, as ever, be dependent on trading conditions over the important Christmas period, [but] we remain confident of meeting our expectations for the full year and continuing to develop Ted Baker as a global lifestyle brand."

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