Can Ted Baker weather the storm?
The UK High Street was under considerable pressure even before the COVID-19 pandemic arrived. With it, it brought store closures across the board with no forecast of a return to ‘normality’. Ted’s racks of formal wear fell out of fashion during the crisis, as loungewear was piled up in virtual shopping baskets instead.
It had stores in expensive locations, such as the City and West End, at a time when everyone was at home and footfall dwindled. Pandemic lockdowns hit particularly hard, but even as stores have reopened the long-term structural retail issues still have to be tackled.
Ted Baker was already struggling before the pandemic hit. It had seen its share price drop from over 2,500p in 2018 to 195p at the start of the pandemic. Its ‘white knight’ is chief executive, Rachel Osborne, who has masterminded a turnaround programme. Ms Osborne joined Ted Baker as chief finance officer in November 2019 from Debenhams where she helped steer the department store group through a restructuring. She was appointed interim chief executive a month later. She was finance director at Debenhams and Dunelm, so has plenty of experience of struggling retailers.
Among Osborne’s priorities has been to sort out the group’s property portfolio. The company received a significant cash injection from the sale and leaseback of its former headquarters. To date, Ted Baker has also managed to negotiate rent savings of £8m across its 520 stores. It has saved another £27.8m by tying its rental repayments to turnover. It is now experimenting with small town pop-ups on short leases in areas such as Cardiff, Stratford and Lakeside.
It has also changed its product mix to reflect the new working-from-home environment and to broaden its appeal. At the same time, it has sought to build its online presence. As part of its transformation plans, Ted Baker will invest £6 million in overhauling its ecommerce site in the next two years. While this cannot compensate for the loss of store sales, it needs to happen for the brand to have a chance at rebuilding. Early signs are mixed and this will be a closely-watched element of its update next week.
There are signs that the market is starting to believe that Ted Baker might come through this. The share price has moved from lows of 85.5p to its current level of 156p. Recent results have been received well.
