Ted Baker enters major deal to boost Chinese expansion
today Apr 10, 2019
Ted Baker had some upbeat news on Wednesday as it announced the creation of a joint venture to expand the brand in Mainland China, Hong Kong and Macau.
The new JV, with Shanghai LongShang Trading Company Ltd, will operate Ted Baker stores, concessions and online channels in those key markets and “will drive the long-term expansion of Ted Baker in these markets, combining local knowledge and expertise with [its] proven buying, merchandising, training and brand-building expertise.”
The UK’s firm’s net cash contribution should be around CNY30m (£3.4m). As part of the deal, it will transfer its operations in China and Hong Kong into the new JV and expects transaction related costs at completion of around £6.5m. The deal is “expected to be marginally enhancing to group profit before tax in the current financial year.”
JV partner Shanghai LongShang will assign its rights under the deal to a newly incorporated Hong Kong investment vehicle to be wholly owned and formed by retail companies LongGoal Holdings Co Limited and Infra-Apparel Group Pte Ltd.
The JV is conditional on approval from three Chinese governmental authorities, but assuming it get that approval (which it expects by the end of August), the new company will be responsible for operating Ted Baker exclusively in Greater China. It “will drive the long-term expansion of [the brand] in the region, combining the local expertise of the JV partner, including the knowledge to support expansion into Tier 2 and Tier 3 cities in Mainland China, with the proven buying, merchandising, training and brand-building expertise of Ted Baker.”
In recent years, Ted Baker has invested in introducing and developing its brand in the Mainland China and Hong Kong markets and has opened a number of stores, including three in Hong Kong as well as five stores and one outlet store in Mainland China. The company said it “believes the JV will support delivery of the significant growth potential of the brand in the Chinese market. The JV intends to build on Ted Baker's existing store portfolio, expand the concession network and further invest in Ted Baker's local market online capabilities.”
The venture is expected to break even in the 2021/22 financial year.
So what track record do its new JV partners have? The UK firm said that LongGoal and Infra together “bring a wealth of experience in digital marketing, e-commerce operations and building successful joint ventures in China.”
Infra has “established brand-building and store rollout credentials in developing the Golfino brand to 60 stores across China over the last five years. Infra also has strong digital marketing and e-commerce operations experience.”
Meanwhile, LongGoal currently operates as a successful retail distributor for Gant, operating more than 165 directly-owned and 25 sub-franchised locations in China as well as 44 directly owned and franchised Bebe stores.
Ted Baker said the JV “will be able to leverage LongGoal's existing nationwide network of human, physical and supply-chain infrastructure to drive long-term growth in the region.”
Acting CEO Lindsay Page added: “We are very excited about the next stage in the growth of Ted Baker across the significant Chinese market. Over recent years we have invested in introducing the Ted Baker brand to Chinese customers, and we are confident that the creation of this JV will build on this platform and deliver meaningful long-term growth.”
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