- Ted Baker has extended its revolving credit facility by over a year, although the total money available from its creditors has been cut
- The retailer wants to boost its online focus and increase its stock turnover, but investors are losing confidence
High street retailer Ted Baker (TED) has extended its credit line by over a year as it looks to fund an overhaul of its struggling business.
The company previously had a “restricted” revolving credit facility (RCF) of £25m maturing in January 2022, and another £108m credit line until September that year. But under a new agreement with its lenders, these will be replaced by a £90m RCF, which will reduce to £80m in January 2022 until the maturity date of November 2023.
When combined with a net cash position of £66.7m at the end of January this year, Ted Baker says that the new arrangement with its creditors will ensure it has the cash and liquidity to deliver on its transformation plan. It added that the deal includes amendments to covenant tests relating to its adjusted cash profits (Ebitda) performance, which will provide it with “further financial flexibility”.
Ted Baker had begun a shake-up of its business just before the Covid-19 pandemic struck, which includes boosting its online focus and increasing the turnover of its stock as it tries to keep up with the rise of e-commerce and fast fashion. The revamp has been led by a new chief executive, Rachel Osborne, who was appointed in December 2019 on an acting basis, before taking up the post permanently in March last year.
But the high street shutdown during the Covid crisis has dealt a substantial blow to Ted Baker’s plans. When reporting results for the half year to 8 August, the company said it had decided to send 38 tonnes of “terminal stock” to charity. Statutory pre-tax losses almost quadrupled year on year, to £86.4m, on the back of lower sales and £48.1m of impairment charges.
Many investors’ have lost confidence in the retailer – the shares have shed almost 75 per cent of their value in the last two years. Eyebrows have likely been raised again, after the company announced that the publication of its full-year results would be delayed by over a week to 10 June, which it blamed on disruption to the audit process caused by Covid-19.
Still, Ted Baker says that its earnings for the year to 30 January will be in line with market expectations; analyst consensus compiled by FactSet projects that pre-tax losses will narrow from £79.9m to £35m. A digital revamp is welcome and long overdue, but investors should bear in mind that its completion could take some time. Hold, cautiously, at 173p.
Last IC View: Hold, 126p, 9 Dec 2020
