Buy tip top Ted Baker

The foundation of the group's appeal lies in the strength of its 'global lifestyle brand', coupled with multiple routes to market - namely retail (50 per cent of profit), wholesale (38 per cent) and licensing (12 per cent). These channels are increasingly complemented by a growing online business. The breadth of Ted Baker's sales platforms means it has been able to consistently achieve high turnover growth from a relatively small store and customer base. And the company is currently undertaking a substantial investment programme (capital expenditure is expected to come in at £45m in the year to the end of January) to underpin future growth, including the development of a European distribution centre, increased international store openings, refurbishments and upgrades to business systems.

Trading since June has illustrated the resilience of the business despite challenges in the wider fashion retail market and Brexit-related concerns. Between 14 August and 12 November, third-quarter retail sales grew 15.4 per cent (6.7 per cent on a constant-currency basis) with an 8.8 per cent increase in average new space. This was achieved despite tough comparative figures and difficult market conditions. Online sales grew by nearly a third and now represent almost 16 per cent of total retail sales. Meanwhile, the run-rate through the quarter boded well for Christmas trading. Importantly, gross margins across the retail and wholesale businesses were in line with management expectations, with wholesale revenue up 13.2 per cent (6.7 per cent on constant currencies) thanks to solid performances in the UK and North America. And the international expansion is proceeding well. During the third quarter alone, the group opened new sites in Atlanta, Miami and Calgary in Canada, with further concessions opened across premium department stores in China, Germany, Japan and Spain. There were also licensed store openings in Dubai, South Africa and Mexico.

Although international expansion is clearly part of the business plan, Ted Baker's brand strength means the domestic business - which still accounts for the lion's share of group revenue at 52 per cent followed by Europe at 39 per cent - could be a key destination for tourist traffic while the pound remains depressed. Data from consultancy Global Blue has already indicated a post-referendum pick-up in retail tourism following sterling's decline.

As to the cost implications of current global exchange rates, heart can be taken from the pricing power Ted Baker's brand gives it. Indeed, in the half-year to 13 August, retail gross margins improved from 64.0 per cent to 65.6 per cent thanks to more full-price product sales. That suggests that even if Ted Baker is forced to put through price rises to offset higher input costs, its customers aren't the sort to be deterred. Ultimately, if the product remains top quality, customers should remain loyal.

On that note, we think the brand looks very well placed based on its focus on the premium lifestyle market. The tribulations of inflexible mid-market retailers has contrasted with the better fortunes of businesses such as Ted Baker that are taking market share by offering a genuine 'point of difference' for customers through a strong brand, a clear position on price and driving repeat business. This is particularly significant in light of the growing number of online pure-play disrupters such as Asos (ASC) and Boohoo (BOO) and other, more value-based operators, too.