Industry experts believe founder and former CEO Ray Kelvin’s departure from the “previously untouchable” Ted Baker played a big part in its half-year loss.
The premium retailer reported a loss before tax of £23m for the 28 weeks to 10 August 2019, down from a profit of £24.5m during the same period in 2018. Group revenue edged down 0.7% to £303.8m. Ted Baker reported a loss before tax, exceptional items and new property leasing standard IFRS 16 of £2.7m, compared with a profit before tax and exceptional items of £25m in the same period last year.
Several industry experts believe Kelvin’s resignation in March, following allegations about his conduct, has impacted the retailer’s performance.
“Whether Kelvin’s departure was justified or not, the evidence looks like they are worse without him”, one menswear insider said.
A long-term partner of Ted Baker said: “Ray Kelvin built the business from scratch, and many of its initiatives and [much of its] drive came from him.
“Every business is going through difficulties, but there can’t be a worse time for a business to lose its leader and inspiration. It will have hugely impacted the brand, and will continue to do so. You can’t just go out to a recruitment company and find another Ray Kelvin.”
Retail analyst Mark Pilkington suggested Kelvin’s departure has damaged the brand’s reputation: “I think that what has gone wrong with Ted Baker is wrapped up with the departure of founder Ray Kelvin. Kelvin’s larger-than-life personality was the heart of what made Ted Baker unique – the quirkiness, the humour and the innovation.
“Without him, the company seems lost: just another clothing brand adrift in the current retail storm. The scandal has damaged the brand reputation.”
Retail analyst Richard Hyman said: “Ray had an enormous power over the business, Ted Baker was Ray. You can’t take somebody like Ray out of a business without having an impact.
“However, I’m not sure that there’s been enough time for Ray’s departure to have been the sole impact.”
Some industry experts believe the losses point to much deeper issues within the business than Kelvin’s departure, including its multichannel proposition and a lack of brand identity.
Retail sales, including ecommerce, dropped 2.5% to £214.5m. UK and European sales were down 3.9% to £141.3m. Online-only sales fell 1.3% to £52.3m. Ted Baker said the period was “characterised by unprecedented levels of promotional activity and “heightened levels of consumer uncertainty”.
“Worryingly, despite a strong multichannel proposition, Ted Baker’s online sales declined”, said Emily Salter, associate analyst at GlobalData. “The retailer can therefore not solely blame the troubles of the physical high street for its fall from grace, as it has previously performed strongly online even as retail revenue growth became more subdued. This points to more significant problems with demand for the brand and the impacts of regular discounting.”
Hyman agreed: “I’m shocked by [the drop in profits]. A few things have gone wrong and they’re not really disclosing what they may be. However, Brexit, political uncertainty and promotions are just an excuse.
“They’ve been doing loads more promotions, but they’re doing them because they’re not selling enough – it’s not that they’re not selling enough because they’re doing more promotions.”
Fashion brand consultant and former Next womenswear buyer, Elizabeth Stiles, said new Scandinavian competition and lack of brand identity have had an effect: “Ted Baker has got a whole lot more competition than they used to, for example, Ganni and Reformation, who are elbowing themselves into the same market. Last year, Scandi brands that also offer cool workwear too weren’t as accessible as they are now.
“At the minute, Ted Baker doesn’t have an identity. It needs to play more on the fact that it’s a British brand by creating a ‘Made in Britain’ range with a sustainable message. If you’re paying those prices then you don’t want it to say ‘Made in China’. The brands that are doing well are completely transparent [about their production].”
Richard Lim, chief executive of research consultancy Retail Economics, agreed that Ted Baker and its competitors, including Karen Millen, Coast and LK Bennett, have come under immense pressure: “Ted Baker is in that particular part of the market that suffers from high returns rates, because it sells occasionwear at higher price points. When they’re ordered online they suffer from a particularly high return rate. This and other underlying trends have caused it to suffer.”
Analysts believe Ted Baker has a lot of work to do, but will be able to revive itself and become profitable again without its founder and former leader playing a key role.
Salter said: “If the previously untouchable Ted Baker can restore its brand identity to revive shopper interest and escape from the cycle of frequent discounting that a number of retailers seem to be stuck in at the moment, it could return to being profitable.
“It should take the opportunity to poach Karen Millen and Coast shoppers who are reluctant to purchase online. [It] should review its sales channels, as it sells through department store retailers, leaving it exposed to the troubles of players such as House of Fraser and Debenhams.”
Hyman agreed: “I do think it can become profitable again. If Ted Baker can’t become profitable again, then god help most apparel brands.”