Once a “darling of the UK high street” fashion retailer Ted Baker has announced a sales slump, whilst in the midst of a turnaround plan, after several challenging years of trading.
The brand, famous for stamping a quirky twist onto formal fashion, has experienced a sales fall of 44% over the past financial year — impacted by the lack of consumer demand for formal wear, in a year when weddings and functions have been postponed through on/off lockdowns.
The business argues that it is now better placed to navigate the continuing disruption, with CEO Rachel Osbourne stating there had been a “very pleasing” return to demand since stores reopened and the business is actioning a transformation plan which also includes a greater focus on online sales.
Several retailers such as John Lewis Partnership and Marks & Spencer have felt the pain of Covid-19 more significantly if they were in a challenging position at the start of the pandemic, and this is certainly the case for Ted Baker.
At the time, the business was trying to recover from some earlier scandals including the departure of CEO and founder Ray Kelvin — following misconduct allegations, Mr Kelvin left the business in March 2019.
In December 2018, former employees launched an online petition on the workplace networking website Organise, accusing him of inappropriate behaviour. More than 200 Ted Baker staff pledged to finally breaking their silence after at least “50 recorded incidents of harassment” at the fashion retailer.
Mr Kelvin took immediate leave and months afterwards announced that although the business was his “life and soul”, having created the brand in 1988, that “the right thing to do is to step away from Ted”.
But the challenges didn’t stop there for the fashion retailer, which had been seen as a revolutionary brand in everything from store layout to designs that were loved internationally. There was also an accounting scandal to contend with.
Shares plummeted when the business announced in January 2020 that an accounting error it had highlighted a year earlier, was twice as big as initially thought, which meant there would be a £58 million deficit on its balance sheet.
Preliminary investigations demonstrated the business to had overestimated the value of stock held in January 2019 by between £20m and £25m. At the time in question, the company was audited by accountants KPMG.
After the appointment of accountants from Deloitte an investigation showed the real extent of the issue, with shares in the business falling nearly 10% on the release of the news.
And since then with the on/off lockdowns and stores being forced to close, alongside the huge shift in the type of fashion being purchased — the blues for Ted Baker haven’t lifted.
Ted Baker reported a pre-tax loss of £107.7 million for the year to the end of January 2021, previously stating a £77.6 million loss in the 12 months prior.
CEO Rachel Osborne, ex Debenhams CFO, who joined in March 2020 to transform the beleaguered fashion brand said: “While the impact of Covid-19 is clear in our results and has amplified some of the legacy issues impacting the business, Ted Baker has responded proactively and is in a much stronger place than it was a year ago.
“During the period, we delivered robust cashflow generation, fixed our balance sheet, refreshed our senior leadership team and today we are upgrading our financial targets for the second time since outlining our new strategy last summer.
The business is reported to have signed an extension to its credit facility recently to deliver on its transformation plan.
But like many of its rivals, the business has more to focus on than just finance, in a fashion world that has transformed remarkably over the last 12 months.
Sales of fashion have been focussed on relevant trends like athleisurewear, as consumers have lived a very different existence, and fashion e-tailers like ASOS and Boohoo who have both made acquisitions of traditional high street brands, seem to have grown from strength to strength – despite both suffering questionable issues around their ethical and environmental policies. Additionally with environmental issues on the mind of consumers more than ever before — alternative offers around clothes rental and swapping to resale sites show signs of positive engagement and growth.
Just like high street casualties Debenhams and Topshop, could Ted Baker find the transformation more challenging than the board room predicts when you factor in the changing consumer?
More challenger brands are entering the market, more fashion labels are moving into DTC, buy now, pay later options allows many consumers to reach into a higher tier of a fashion offer to luxury brands and Ted Baker designs are not seen as being as disruptive as they once were.
It seems at a time when the brand was firefighting issues on ethics and finance, some competitors were maximising the online revolution and putting the consumer firmly at the heart of their campaigns.
Whether this might be “too little, too late” for Ted Baker, without significant change, is still yet to be seen.