Ted Baker’s share price has fallen to a level last seen in 2003 as the company issued a terrible update.
The stock price took a knock last week when it confirmed it overstated its inventory by between £20- £25 million. The lowered guidance today was the latest in a string of profit warnings. To add insult to injury, the group also confirmed the dividend has been suspended in a bid to conserve cash. Lindsay Page has stepped down as CEO, and keep in mind he was only appointed in April. This is a train wreck of an update, and it feels like the company is coming apart at the seams.
Trading has been tough for retailers in recent years as the rise of online shopping has hurt the high street. To make matters worse, the UK consumer environment has become more fragile on account of Brexit. Wages are outstripping inflation, but shoppers are still watching their outgoings. Ted Baker said that gross margins are tipped to be below expectations on account of increased promotional activity.
Some fashion houses are in a race to the bottom in terms of price in order to get customers in the door, and in turn, stock out the door. Shoppers are becoming savvier, so they are keen to sniff out bargains. In recent years, lower-cost clothing brands like Primark have seen their business increase, so too have luxury goods like LVMH. Brands like Ted Baker that fall into the middle of the price range are coming under pressure, which ties in with middle-income earners – the squeezed middle.
We are approaching the Christmas season and Ted Baker expects trading to remain challenging. The UK still hasn’t left the EU so political uncertainty still hangs over the British economy. The new CEO Rachel Osborne will have her work cut for her, as she will have to steer the ship top calmer waters, which will not be an easy task in this consumer climate.
