Ted Baker profit warning as e-tail slows, N. America weather woes weigh on sales
Ted Baker updates used to be brimming over with good news. But there's been little of that in recent periods and on Tuesday the fashion retailer talked about a “difficult trading period with ongoing external challenges impacting performance” in the 19 weeks up to June 8.
The company said that “consumer uncertainty in a number of key markets and elevated levels of promotional activity across our global markets have resulted in extremely difficult trading conditions during the financial year to date.”
And it's expecting more of the same ahead for both its own stores and those of its trading partners, which means Tuesday also came with a profit warning. The company is now expecting underlying pre-tax profits for the year ending January 25 to sit between £50 million and £60 million. The figure was £63 million in the previous year.
“This reflects the board's view of anticipated trading for the rest of the year, the positive impact of new product initiatives and planned cost efficiencies,” it said.
At least the company has managed to generate a headline sales rise in the 19-week period, although it was far from impressive. It said that group revenue rose 3.8%, or 1.9% in constant currency. But total retail sales, including e-commerce, fell by 0.3%, or a 1.8% drop in constant currency. That was despite its average retail square footage rising by 5.3%. Usually e-commerce is booming and able to take up the slack, but this time it rose only 2.4%, or an even smaller 1.2% in constant currency. Given that it now accounts for 26% of total retail sales (compared to 25.3% this time last year), e-commerce growth slowing means it can't seriously shift the dial on the company’s overall sales figure.
The company’s wholesale revenue, including acquisition revenue, rose 14.2%, or 11.4% in constant currency. But on a like-for-like basis, it was down 1.2% and a worse 3.6% in constant currency.
“The performance reflects difficult and unpredictable trading conditions, unseasonable weather experienced across North America in the early part of the period and the highly promotional retail environment across our global markets,” it explained. But there was worse to come as it added that it “also experienced some challenges with our Spring/Summer collections,” although “these have been appropriately addressed.”
The company said that the period benefitted from incremental footwear revenue, following the acquisition of No Ordinary Shoes, which completed on January 1.
But as a result of the highly promotional retail environment, both retail and wholesale gross margins were lower than last year.
And in light of the challenging start to the financial year, “management are actively focused on product initiatives and cost control.”
Other plans to drive a more dynamic performance include monthly product drops and speed-to-market projects that will start in the coming weeks.
CEO Lindsay Page said of this: “Ted Baker remains an outstanding brand and, underpinned by the strength of our flexible business model, including a relatively low number of own stores that showcase the brand, we remain confident in our long-term growth prospects.
“As a team, we are proactively addressing the challenges we face as an industry. Several of our new product initiatives will commence imminently and we are confident in our collections for the coming season. We are relentlessly focused on achieving cost efficiencies as well as further cost savings throughout the business.”
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