Ted Baker warns on profits as CEO, chairman quit
By Michele Maatouk
Date: Tuesday 10 Dec 2019
(Sharecast News) - Fashion retailer Ted Baker announced the departure of its chief executive officer and chairman on Tuesday as it scrapped its dividend payments and warned on profits.
Lindsay Page, who took over from founder Ray Kelvin in April, has resigned as CEO and finance director Rachel Osborne has agreed to take on the role on an interim basis. In addition, David Bernstein has stepped down as executive chairman with immediate effect and a search for his successor is underway. Independent director Sharon Baylay will take on the role on an interim basis.
The departures were announced alongside a trading update, in which the retailer downgraded its expectations for the year. It now expects to report a full-year pre-tax profit of between £5m and £10m dependent on Christmas trading, following weaker-than-expected trading over November and Black Friday. Analysts had been expecting pre-tax profit of £27m.
"An anticipation that difficult trading conditions will continue, and therefore it is appropriate to take a more cautious outlook for the remainder of the financial year, which includes the key trading months of December 2019 and January 2020," the company said.
During the 17 weeks to 7 December, group revenue declined 1.2% to £203.8m, with retail sales down 6.4% and wholesale sales 13.7% lower.
"The last 12 months has undoubtedly been the most challenging in our history, yet the Ted Baker brand remains well supported by our customers, partners and trustees and we appreciate their ongoing support," it said.
"We are taking the necessary immediate actions to address underperformance and improve efficiencies across the wider group and are confident that these will return the group to a stronger position and continue the brand's long-term development."
Following speculation earlier this month, Ted Baker confirmed that it had hired consultancy firm AlixPartners to carry out a review of its operational efficiency, costs and business model. As a result, it has decided to temporarily suspend dividend payments.
At 0935 GMT, the shares were down 17% at 332.80p.
Russ Mould, investment director at AJ Bell, said: "Ted Baker is truly having the nightmare before Christmas. Following the departure of its founder Ray Kelvin, several profit warnings and a £25 million inventory blunder, along comes another shocking trading update, the departure of CEO Lindsay Page and chairman David Bernstein and the suspension of the dividend.
"Page's days were already looking numbered given the inventory blunder related to prior years when he was finance director.
"There were some rumours earlier this year that Mr Kelvin may take the business private in order to regain control, given that he already owns 34.87%. It feels like each passing day since his departure creates an opportunity to buy even cheaper given how the share price has plummeted. The stock is now down 85% since the founder left Ted Baker on 4 March.
"The business appears to be unravelling with accounting issues and potentially product issues given how Ted has gone from being a retail superstar to one very much out of fashion. And that's not forgetting Mr Kelvin's alleged inappropriate behaviour towards staff."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Discounting's hurting the sector, not helped by the Black Friday sales period. That's hurting Ted's gross margin and has left profits unravelling, and the higher price tags on Ted's clothes means it's more vulnerable to price-slashing than some rivals.
"We think Ted Baker's brand still has legs, with digital sales in North America growing comfortably. The fact remains though the UK and Europe are putting the brakes on overall group performance, and weak consumer spending isn't showing signs of strengthening yet. Ted isn't down and out at this point, but further blows can't be discounted."
Whitman Howard analyst Tony Shiret said: "The next phase is going to be critical to preserving TED's place in the pantheon of fashion brands in our view. Given its 60% womenswear mix we think that a good starting place might be to have a much more female-oriented management team and female-facing corporate positioning.
"For now the finances need stabilising which probably means a rights issue."
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