Ted Baker revenue dives but upbeat firm beats own worst-case scenario

By

Sandra Halliday

Published
Jul 21, 2020

Ted Baker’s trading update on Tuesday showed just how hard the company has been hit by the lockdown and its aftermath as revenue plummeted 55%, even though it described its performance as “resilient”.

It gave no information about the rumoured job cuts it’s planning, but in the 11 weeks from May 3 up to July 18, it had some justification for using the word resilient, saying it saw a particularly strong performance online. It also highlighted its “more dynamic trading stance since the beginning of the year, reflecting more sophisticated cross-category merchandising, refreshed social media activity and increased marketing spend”.

And it said that following the launch of its Ted's Formula for Growth three-year transformation plan, it’s “pleased with the good progress and momentum made on all the key operational and financial milestones for FY21”.

Meanwhile, it also has more cash available to it (£56.7 million) than it had expected “due to strong cash management”.

But of course, all that good news couldn’t disguise the fact that group revenue in the period fell by that massive double-digit figure to just £60.9 million. Overall, retail was down 50% at £51 million with store sales plunging 79% to £15.8 million and e-commerce up 35% to £35.2 million. Wholesale was down 75% at £7.4 million as its wholesale customers’ stores stayed closed, and licensing income fell 29% to £2.5 million.

Those are painful numbers for a company that has been struggling for some time and that has just launched a turnaround plan. 

But the retailer said that it has made a strong start on its transformation goals with structural bought-in margin improvement, a continued focus on working capital efficiency, reduced expenditure, and improved retail store profitability.

On the bought-in margin, it said the SS21 collection will be sourced from fewer than 100 suppliers (previously over 150 suppliers) “providing more concentrated negotiating power and buying efficiency”.

It seems to be taking an upbeat stance on current trading, despite that precipitous plunge. Perhaps that’s understandable given that overall trading, while very weak by normal standards, has been ahead of the worst case scenario it modelled in an update on June 1. 

And online trading has remained “significantly ahead of expectations, with the group continuing to benefit from consumer behaviour shifting to online, the uninterrupted operations of our global distribution centres and enhanced trading mechanics introduced during the year”.

That 35% e-tail rise it reported actually meant online represented 69% of total retail sales in the period (up from 25% a year earlier). And while that’s because of this year’s extraordinary circumstances that hopefully won't be repeated, it's still significantly ahead of the 19% decline in the base case revenue scenario.

As for its shops, 95% of them were open as of last weekend and 75% have been operational for the last four weeks. But they remain hugely challenged as is clear from the fact that like-for-like store sales were down 50% versus last year for the last four weeks of the trading period that it reported on Tuesday. That four-week period started after the big reopening day in England (June 15) and showed that reopening wasn’t quite the ‘big bang’ some had expected.

CEO Rachel Osborne said of all this: “I am pleased with the early progress we have made in driving operational excellence and cost efficiencies since the launch of Ted's Formula for Growth in June.  Our customers are engaging with the brand and responding to our Covid-19 promotional activity, as evidenced by our resilient trading over the past 11 weeks. 

“Our performance is encouraging, but I caution that it is still early days, and we have a substantial amount of work to do over the next 12 months against a backdrop of significant uncertainty in the world. However, the brand has an exciting future, and I am looking forward with cautious optimism that the initiatives currently under way across all areas of the business will bear fruit over the next 12 months.”