Ted Baker (TED) has started an independent review of its accounts after discovering the value of its inventories had been overstated by around £20-25m over a number of prior years.
While the overstatement will not have a cash impact, it does further damage the clothing retailer’s image, which it has been struggling to rebuild since its founder Ray Kelvin, stepped down in the midst of misconduct allegations in March. Shares dropped in October when the group unveiled an unexpected loss for the six months to August 2019.
The board has appointed Law firm Freshfields Bruckhaus Deringer, with accountants expected to follow, to carry out a comprehensive review of the issue. The group did not disclose how many years the overstatement applied to, and has said it will not comment further while the review is ongoing.
We highlighted growing stock levels as a cause for concern following the group’s recent half-year results. It sat at 34 per cent of sales at the time, albeit inflated by the acquisition of its footwear licensee, and had been 37 per cent at the full year.
Broker Peel Hunt said the announcement would be “a bump in the road” for the average business, but “is the latest in a line of setbacks that continue to damage investor confidence” for Ted Baker.
