Ted Baker builds war chest for new era

Ted Baker was buffeted by a weak consumer environment, underperforming in key selling periods, including Black Friday. Retail turnover declined 5.4 per cent on a constant currency basis to £440m. Expensive store expansion and weak sales ate into the underlying gross margin, down to 55.6 per cent from 59.8 per cent a year earlier.

The company concedes that inefficient inventory management and lengthy stock cycles have resulted in capital being locked in for excessive periods, though there is evidence of progress, as underlying working capital as a proportion of sales contracted from 27.8 per cent to 15.8 per cent. Towards the close of the year, Ted suspended its dividend and slashed capital expenditure in order to alleviate cash flow pressures, which had been exacerbated by a failure to control costs. 

In keeping with peers, Ted is putting its faith in e-commerce and is making it a core investment priority. Online volumes were weak before the onset of coronavirus, with sales down 2.5 per cent over the period, while the pandemic continues to depress volumes.

Peel Hunt forecasts full year 2021 adjusted pre-tax profits and EPS of £12.8m and 21.6p, respectively, rising to £17.5m and 29.4p in FY2022.