The difficult retail environment claimed another victim this morning after the Ted Baker share price plunged to a six year low, after becoming the latest in a long line of high street retailers to issue another profits warning.

This miss on profits has come about despite a fairly limited retail footprint in the UK, given that most people come across it as a department store concession or inside various transport hubs, like airports and train stations.

In the last 12 months the value of the company has more than halved from just over a £1bn market cap to £450m.

At the end of last year the company downgraded profit expectations from £74m to £63m after writing down the value of unsold stock to the tune of £5m, while the negative headlines surrounding its ex CEO Ray Kelvin didn’t help in terms of costs either.

Its final numbers actually came in worse than that, when exceptional items were included as total profits fell by 26.1% to £50.9m, with the company also forced to write down unpaid bills due to the closure of House of Fraser, as well as completing the sale of No Ordinary Shoes which completed on the 1st January.    

Management cited ongoing uncertainty in a number of key markets and elevated levels of promotional activity, for the downgrade to profit expectations to between £50m and £60m for this financial year.

Total revenues actually saw an increase of 3.8% however this wasn’t enough to offset poor trading in North America, as well as a highly promotional retail environment globally which is squeezing margins, and likely to continue to do so. If this continues questions may start to get asked about the sustainability of the dividend.

The slowdown in China is also probably not helping either, with general retail sales in the region at a sixteen year low. In April Ted Baker announced a joint venture with Shanghai LongShang Trading company, which is expected to enhance the Ted Baker brand into mainland China, Hong Kong and Macau and open up retail concessions as well as an online presence into what is likely to be one its biggest markets for years to come.

Management said at the time that they expected the joint venture to be marginally enhancing to this year’s full year profits, assuming that it is signed off by Chinese regulators. Whether this remains the case in light of the slowdown in China remains to be seen. The total cost to Ted Baker is expected to be in the region of £6.5m, but would be small change in comparison to the number of potential new customers in the Chinese market over time.Today’s share price fall is certainly disappointing, however with a fairly limited store footprint and a diverse global reach, shareholders will be hoping that further downside is limited, and hoping to find a base after a wretched 12 months.

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