Ted Baker shares plunge after profits slip
The fashion company saw sales climb but was held back by tough retail conditions and predicted a further difficult period ahead.
Thursday 4 October 2018 16:42, UK
Shares in Ted Baker have fallen sharply after its profits were knocked lower by the collapse of House of Fraser - and it warned of a "challenging" period ahead.
The fashion brand's stock sunk by as much as 14% in morning trading after half-year results showed a 3.2% drop in pre-tax profits to £24.5m for the 28 weeks to 11 August.
That was after taking into account nearly £600,000 owed by House of Fraser when it collapsed before being rescued by Sports Direct - a debt that Ted Baker does not expect to recover.
The group, which has 544 stores and concessions worldwide including 201 in the UK, as well as a wholesale business, saw retail sales creep up by 1.1% in the period.
That was a sharp slowdown compared to the 13.9% growth seen in the same period last year.
Performance was held back by cold weather earlier in 2018 as well as the heatwave in the summer, the company said.
It also pointed to more general "challenging external trading conditions, particularly in the UK".
Profit margins were squeezed as the company increased promotions in response to the tough retail environment.
Trading conditions since the start of the second half of the financial year have also been difficult, with warm weather continuing to play a part, Ted Baker said.
In the UK, where the difficulties of department stores such as House of Fraser and John Lewis have hit the headlines, the company said it had been "impacted by the well-publicised challenges facing some of our trading partners".
Chief executive Ray Kelvin said: "Whilst we believe that the second half of the year will remain challenging due to external factors, we are well positioned to continue Ted Baker's long-term development."
George Salmon, equity analyst at Hargreaves Lansdown stockbrokers, said: "The group is clearly up against it for the rest of the year, and this will dampen investors' spirits.
"However, Ted has delivered excellent results for shareholders over the last 10 years, and this track record shouldn't be discounted just yet.
"Still, to make the next decade just as strong, improvements are needed sharpish."
Shares closed the day 10% down.