Mixed news in Ted Baker trading update as 'hug-gate' fallout continues
As ‘hug-gate’ continues to wreak havoc with Ted Baker’s share price, the company on Thursday issued a trading update that showed a “resilient performance despite challenging external trading conditions.” So does that mean the firm, which is currently dealing with allegations of inappropriate staff hugging by Ray Kelvin, its CEO, driving force and biggest shareholder, is doing just fine?
Not totally, although some good points in the update did drive the firm's shares back up in early Thursday trade and it's clear that much of the bad news is linked to delivery timings.
In the period from August 11 to December 1, its group revenue fell 0.2%, or 0.4% on a currency-neutral (CN) basis. That’s not great news, even though it’s not exactly unexpected given that the trading period covers the transitional late summer month (August) when the weather couldn’t quite decide whether it wanted to be summery or autumnal, as well as early autumn that was too mild for its own good.
So what’s the company’s explanation for the performance? It said that the sluggish trading “reflected the anticipated decline in wholesale sales due to the timing of deliveries, largely offset by the retail sales performance.” It came despite the “continuing challenging external trading conditions across our markets. In the UK, Europe and the East Coast of America, trade was affected by the unseasonal weather at the start of the period and trading in the UK continues to be impacted by the well-publicised challenges facing some of our trading partners.”
What did all that mean in numbers? Total retail sales including e-commerce increased by 2.3% (2.1% CN) for the period and average retail square footage rose by 5.2% to 427,586 sq ft suggesting a noticeable like-for-like sales decline in its stores.
E-commerce sales, “which are an integral and increasingly important component” within the retail channel, increased by 18% (15.3% CN) and represented 30.3% of total retail sales for the period, up from 26.3% a year ago.
That would have been the best bit of news in the report were it not for the fact that “total retail sales for the last eight weeks of the period increased by 4% as the weather became more typical for the season.” Any sign that overall sales, and especially physical stores, can bounce back in the current retail environment is always to be welcomed.
As the company anticipated, wholesale sales for the period decreased by 6.5% (7% CN) due to the earlier timing of wholesale deliveries in the first half of the year. But it continues to expect mid-to-high single-digit wholesale sales growth (CN) for the full year.
Looking internationally, the firm said that its product and territorial licensees “continued to perform well, reflecting the global strength and appeal of the brand.” It opened licensed stores in India, Kosovo, Saudi Arabia, Singapore and South Korea.
What did Ray Kelvin have to say about it all and potentially about his own challenges at the moment? Not a great deal. "We are pleased with the brand's continued expansion, which is a reflection of the strength of the Ted Baker brand and the design and quality of our collections,” he said. “The investment in our flexible business model ensures that the Ted customer has multiple channels to engage with the brand and underpins our long term development. Our global e-commerce business continues to grow well and is complemented by our digital marketing strategy and unique stores that showcase the brand.”
The trading update did contain the news, however, that the company has appointed Herbert Smith Freehills LLP, a leading and independent law firm, “to conduct an independent external investigation into the [hugging] reports received.” It will report into a committee of the company's non-executive directors that will be chaired by Sharon Baylay.
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