Group revenue increased by 3.5% to GBP306m in the period

Group revenue increased by 3.5% to GBP306m in the period

Shares in Ted Baker tumbled by 14% in early trading as the UK lifestyle brand said it continues to experience retail sales growth, albeit at a slower rate than previously.

In an interim trading update for the 28 weeks ended 11 August, the UK-listed company posted a 3.2% drop in pre-tax profit to GBP24.5m (US$33m) from GBP25.3m last year. Profit before tax and exceptional items increased by 3.5% to GBP25m, while gross margin decreased 60 basis points to 58.3% from 58.9% in 2017.

Group revenue, meanwhile, increased by 3.5% to GBP306m from GBP295.7m in the year-ago period. In constant currency, group revenue was up by 5.5%.

Retail sales including e-commerce increased by 1.1% for the period to GBP220.1m, while e-commerce sales jumped 24.1% to GBP53m and average retail square footage rose by 5.5% to 422,343 sq ft. UK and Europe retail sales edged up 1% to GBP147.1m, while North America sales were up by 1.8% to GBP61.8m. Rest of the world retail sales, meanwhile, slipped 1.8% to GBP11.2m.

Retail gross margin decreased to 64.2% from 65.6% last year as a result of a measured increase in promotional activity in response to what the company called the "challenging external trading conditions".

The group said it is pleased with the positive reactions to its Ted Baker womenswear collection with sales up 7.8% to GBP191.3m and represented 62.5% of total sales, due in part to the increased proportion of e-commerce sales. 

Ted Baker menswear sales, meanwhile, were down 3% to GBP114.7m from GBP118.3m last year, representing 37.5% of total sales. Sales were impacted by the challenging trading conditions within the UK business, Ted Baker said.

CEO Ray Kelvin said the group has continued to develop and expand as a global lifestyle brand across its markets and distribution channels despite the conditions – a feat he said is "testament" to the strength of the Ted Baker brand, the design and quality of its collections as well as the dedication and talent of its teams. 

"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. Our flexible business model ensures that our customer has multiple channels to engage with Ted Baker and our global e-commerce business continues to expand, supported by our digital marketing strategy and unique stores that showcase the brand."

Outlook remains positive despite growth slowing

Emily Salter, retail analyst at GlobalData, notes as many UK retailers struggle to keep their heads above water, Ted Baker continues to experience retail sales growth, albeit at a slower rate than previously.

"Ted Baker continues to expand in the UK and the rest of the world, though not aggressively, recognising that although stores remain important, especially for premium brands, spend is shifting online," Salter says. "Its investment in distribution facilities in North America and Europe will expand its e-commerce capabilities and bolster growth. However, the retailer's reliance on concessions may be a disadvantage as midmarket department stores, such as Debenhams and House of Fraser continue to struggle, with House of Fraser's demise into administration costing Ted Baker GBP0.6m in debtor balances."

Ted Baker is, however, well-positioned to continue to achieve future growth due to its strong brand identity which garners shopper loyalty, alongside its willingness to adapt to developments in technology to improve customer experience, Salter adds.

"Seemore, an AI chatbot, was launched in September, allowing customers to browse, ask questions about, and purchase products from the retailer's AW18 range on Facebook Messenger. In September, the retailer also acquired No Ordinary Shoes to bring footwear licensing back in-house, allowing it to leverage its global infrastructure to drive future growth and sales.''