Ted Baker’s cost-saving plan is a “great start” for the business, say industry experts, but the retailer needs to fill its CEO and creative lead roles before it makes “inroads to recovery”.
Ted Baker today announced that it has conducted a review of its operational efficiency, costs and business model after a “very challenging year”. This has resulted in 102 redundancies and the removal of a further 58 job posts that are currently vacant, largely across head office and other main business functions. Ted Baker has around 750 head office staff and 3,700 employees in total.
The company said the expected financial impact from this initiative will be to reduce costs by £5m in the current financial year, and by £7m on an annualised basis.
Industry experts said reducing the office cost base, by simplifying and de-layering the group’s organisational structure, will assist with the company’s much-needed turnaround.
“Through months of analysis, Ted Baker and [restructuring firm] AlixPartners have identified the right jobs and right numbers to go”, one financial source close to Ted Baker said. “Given AlixPartners has been working with Ted Baker for quite some time now, I would imagine that this set of redundancies will be it.”
One premium retail source told Drapers: “This will be a well thought through plan that takes into account the effect this sort of thing has on the workforce.
“It’s a great start and the infrastructure needs to be robust and lean before the team can focus on rebuilding. Once this is complete, the rest of the business can get on with the turnaround plan.”
It comes after it was reported earlier this week that Ted Baker is looking to sell its London headquarters to help boost its balance sheet amid an accounting crisis.
“Selling the Ugly Brown Building will help buy room and time (liquidity) for Ted Baker”, another financial expert close to Ted Baker told Drapers.
The CEO of a premium retailer agreed: “Buying their head office when times were good [in 2015] was a really good idea as it’s a valuable asset that they can sell to help finance their turnaround plan. They bought it before that area was really regenerated. It is now a more expensive place.”
She added: “The current plan is all about cost-cutting, but only when they settle on a CEO and a permanent chief creative will the business make inroads to recovery.”
Ted Baker’s founder and former CEO Ray Kelvin resigned in March 2019, following allegations about his conduct. Lindsay Page, who joined the group in 1997 and had taken over from Kelvin, resigned as CEO of the premium retailer with immediate effect in December 2019. He was replaced by Rachel Osborne as acting CEO. The brand’s chairman David Bernstein also quit in December.
US fashion designer Michael Bastian has taken over Kelvin’s role as interim chief creative officer, while Sharon Baylay is acting chair of the board. Drapers understands searches are still progressing for a permanent CEO and chairman for the business. It is also understood the company is in talks with internal hires for the role of creative lead.
“They need a permanent creative lead to get the product on track for the future,” the premium retail CEO said. “An interim creative is never good, unless they become permanent, as they always want to change things but won’t be there to see things through – then a new permanent will change again.
“Rumours continue to swirl regarding Ray Kelvin [coming back to the business] but I don’t think this is the answer. The share price is considerably down on the year so if he wanted to launch a bid this would be the time to do it and I see no sign of that.”
The financial source close to Ted Baker said the company is interviewing for a new CEO, but that it is a “poisoned chalice” role, so it is likely to be someone who has “nothing to lose” that will take it on: “It’s also a [public listed company], so it will probably need to be someone who can manage city and shareholder expectations.”
The future of the retailer is “brighter, but not bright”, another financial source close to Ted Baker said: “It’s got a long road ahead. I suspect it needs to downsize even further until it starts to grow again. However, I think it will be okay in the long run. Ted Baker continues to be a good brand as long as it can get through this rough patch.”