UK high street fashion brand Ted Baker has reported resilient growth, boosted by a strong performance online, but warns there is more work to be done.
Group revenue was down 55% to GBP60.9m (US$77.3m) in the 11 week period from 3 May to 18 July. Retail sales fell 50% to GBP51m, while store sales slumped 79% to GBP15.8m.
Online was the only division to report a positive result with growth of 35% to GBP35.2m, representing 69% of total retail sales. Like-for-like store sales were down 52% versus last year.
In March, Ted Baker closed its stores across Europe, North America and the UK amid coronavirus lockdowns, and began a controlled re-opening on 29 April. As of 18 July, 95% of the store estate was open globally, and 75% of stores have been operational for the last four weeks.
The retailer says group trading has been resilient and ahead of the base case scenario it provided alongside its preliminary results in early June. Online trading, in particular, has remained significantly ahead of expectations thanks to consumer behaviour shifting to online, the uninterrupted operations of Ted Baker’s global distribution centres and enhanced trading mechanics introduced during the year.
The fashion retailer, which yesterday revealed plans to cut more than 500 jobs, says it is pleased with the progress on its three-year transformation plan. In its trading update today, Ted Baker says initiatives across central functions and the retail store estate in the UK and North America are now expected to result in GBP12m of cost savings in the current financial year, GBP27m on an annualised basis.
“I am pleased with the early progress we have made in driving operational excellence and cost efficiencies since the launch of Ted’s Formula for Growth in June,” says CEO Rachel Osborne. “Our customers are engaging with the brand and responding to our Covid-19 promotional activity, as evidenced by our resilient trading over the past 11 weeks.
“Our performance is encouraging, but I caution that it is still early days, and we have a substantial amount of work to do over the next 12 months against a backdrop of significant uncertainty in the world. However, the brand has an exciting future, and I am looking forward with cautious optimism that the initiatives currently underway across all areas of the business will bear fruit over the next 12 months.”
Covid-19 inflicted disaster
However, positive online sales are not enough to shield Ted Baker from a Covid-19 inflicted disaster, says Emily Salter, retail analyst at GlobalData.
”Hit hard by the impacts of Covid-19 due to its reliance on occasionwear and workwear, Ted Baker’s sales have suffered due to global store closures and a lack of demand for its key products. Other fashion retailers have reported improving revenue from the start of June as lockdowns across Europe eased and consumers started to purchase clothing for social occasions, but Ted Baker is less likely to have benefitted from this due to its occasionwear product focus and slightly older customer profile of 30-45 year olds, with younger consumers more willing to start purchasing again.
“Retail revenue was ahead of Ted Baker’s base case revenue scenario stated in June, with store sales predicted to decline 83% and online sales forecast to fall 19%, giving investors some hope and sending its share price up 12% this morning. Despite this, the steep sales decline experienced will have left the retailer in an extremely difficult position with the need to discount excess stock, damaging the brand’s premium reputation and its margins.
“Online propped up Ted Baker’s performance during the period as sales rose to make up 69.0% of retail revenue (versus 25% last year). However, online growth of 35% did not offset the decline in store revenue and is not as impressive in the context of store closures, indicating that many sales did not transfer online with purchases being lost due to the lack of desire for Ted Baker’s products during lockdown.
“The online channel is likely to continue to perform well even now stores are open, with many shoppers reluctant to return to stores due to safety concerns and changes to the shopping experience, including changing rooms being closed. The retailer has recognised this accelerated shift to the online channel, announcing it plans to cut a quarter of its staff across head office and stores.
“Like-for-like store sales fell 50% versus last year for the four weeks to 18 July, with shoppers in Europe and the US being less willing to buy premium clothing and demand for occasionwear remaining low due to event cancellations.”