Ted Baker to cut 500 jobs after revenue falls 55%

Fashion retailer Ted Baker is set to cut up to 500 jobs – a quarter of its UK workforce – as the coronavirus pandemic continues to cause havoc in the retail sector.

It has been reported that 200 of those job losses are set to take place across the firm’s stores across London.

Revenue fell 55% to £60.9m in the 11 weeks to 18 July 2020, ignoring the impact of exchange rates. This reflects a drop in store sales, which was not offset by better-than-expected online trading, according to the high street retailer.

Wholesale and licence revenue decreased 70% compared to 60% decline in the base case revenue scenario. The weaker performance reflects cautious ordering from store-based trustees since the early phase of the pandemic.

Ted Baker reported a loss before tax of £79.9m in the year to January 25, before the pandemic started to affect sales – causing a 1.4% fall in revenue. That compares to a £30.7m profit the previous year.

As at July 11, net cash was £56.7m, ahead of management expectations and reflecting actions taken to maximise cash and reduce expenditure. The net cash position reflects an aggregate £173m of net proceeds from the previously announced sale of the UBB and capital raise.

Excluding the fundraising proceeds Net Debt for the company would be £116.3m, an improvement during the past 16 weeks from the £137.8m Net Debt as at March 22 2020.

As at July 18, the Company has £161.7m of available headroom on current bank facilities of £108m, with an additional £25m becoming available from September 2020.

Rachel Osborne, Chief Executive Officer, commented: “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.  Our customers are engaging with the brand and responding to our COVID19 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.”

The shares rose 11.5% following the announcement.

Industry reaction

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown

A huge increase in online sales is an unexpected piece of positivity. There were concerns Ted’s higher price tags would have priced it out of the lockdown online shopping sprees, after all why spend big on an outfit no one was going to see? In an ideal world the group will be able to harness this digital surge to propel growth in the future, but this isn’t guaranteed. As the economic forecast worsens, there’s a real risk customers will put off buying Ted’s fancier frocks.

Ted hasn’t managed to change the tide either, with retail sales still taking a serious knock overall. Ted was struggling before the outbreak, so the pandemic came at an already precarious time. Crucially the group seems to be putting some legwork into improving its buying processes, which should ultimately feed into a stronger core business.

Overall there’s a lot of work to be done and executing a full blown strategic turnaround in the current climate is a tall order. The priority from here will be continuing to improve the brand proposition and getting tills ringing, but without slashing prices too much, otherwise profits won’t be able to reap the benefits. That’s a difficult thing to do in a marketplace that becomes more competitive by the day.