They issued a profit warning because of “extremely difficult trading conditions”…
EDIT: In other news, Ted Baker now offers a high dividend yield of ~6% at the current prices. Although they’ll more than likely change their dividend amount in the future.
They’ve extended their 30% off period till tonight and sent loads of emails to those who are signed up! Looks like they’re pretty keen to get cash through the door…
High Street stores often are generational. They are popular for a time period. Then they succumb to the high cost of running a store in the UK. You need to ship so much stuff to pay for a months rent, rates and wages.
Warren Buffet says never buy dying businesses. It’s so rare to see a failing business turned around and become successful. It’s not like there aren’t other businesses out there that are:
a) making profit
b) have a great potential for growth
Like some of you had said, someone may come and turn it around. But I think Ted Baker is a sinking ship.
Profit warnings are hard things to recover from. Especially when the high street isn’t as strong any more, it also goes to show that people have fallen out of love with the brand.
As people would just buy it online. But people aren’t clearly. The brand it’s self has gone downhill
I think the brand is still valuable, but discounting has continued (as mentioned) and now in the 50% off region. I went into our local store (Meadowhall) thoough, it didn’t feel like a “fire sale”.
FULL YEAR OUTLOOK
Expectations for the period ending 25th January 2020 have been reduced to a minimum profit before tax of £5m, with a potential outcome of up to £10m dependent on Christmas trading and final year-end review.
22 Jan 2020 07:00 Update on Independent Review of Inventory
… Ted Baker expects to report that the value of inventory held on the Group’s balance sheet at 26th January 2019 was overstated by £58m. This is materially higher than the £20-25m preliminary assessment announced on 2nd December 2019. As previously stated, the overstatement is a non-cash item and related to prior years.
The update and original announcement say it relates to “prior years”. Do we think that means the recent £209.6m inventories figure is accurate? I’m struggling to see how it can be, if in December they were still over 2x out. I’m still keeping an eye on this, but they are making it hard to want to buy this.
The company will seek to rein in operational costs and decrease inventory levels, which have historically driven up its working capital.
It aims to get to post-capex free cash flow of at least £30m by 2023.
It will have to manage this target along with the demands of investing to bolster its digital capability and deciding what to do with its stores - it has already closed one in Italy.
Long journey ahead, which will be made harder by the dominant 35% shareholding of Ted’s former CEO. How can an ex-CEO have this much shareholding at a mature company, I need to check.
Ray Kelvin’s shareholding will drop by 55% to 15.8% as he’s only buying £3.5m of new shares. I think him holding on has been a good thing for Ted Baker, as has his support in the last few months with the HQ building and this new funding round.