Ted Baker plc

(“Ted Baker”, the “Group”)

 

Interim Results Announcement for the 28 weeks ended 14 August 2021 and Q3 trading update for 12 weeks ending 6 November 2021

 

Ted returns to growth; significantly improves profitability and upgrades core Transformation Plan target on the back of strong liquidity

 

Rachel Osborne, Chief Executive Officer, commented:  

“I'm pleased with the continued progress we're making, as we return to revenue growth, and make big strides back towards profitability. The brand remains healthy, delivering a stronger full price mix alongside encouraging early reactions to the new collection.. The pandemic continues to impact the global retail environment, yet despite this we are delivering against our Transformation Plan. I remain confident that our turnaround of this great global lifestyle brand is on course and that Ted will emerge as a stronger business.”

 

	28 weeks ended 14 August 2021	28 weeks ended 8 August 2020	Change	Change vs. H1 2019
Group Revenue	£199.3m	£169.5m	17.6%	(36.4)%
Reported Loss Before Tax	£(25.3)m	£(86.4)m	70.7%	(10.1)%
Basic EPS	(10.1)p	(64.1)p	84.2%	78.1%
Interim Dividend	nil	nil	nil	(100)%
Net Cash/(Debt)	£12.7m	£60.7m	(74.3)%	(113.0)%

 

 

Summary

• Sales growth showing sequential quarterly improvements in comparatives to FY20
• Improving margins and profitability as Group re-establishes premium positioning. Full price sales mix up over 500bps during H1 and Q3.
• Robust liquidity and continuing positive net cash position of £12.7m at 14 August 2021.
• The Group upgrades its target to achieve a net cash position forward by one year, with this target to be achieved by the end of the current financial year. All other targets have been reiterated.
• The Group is currently experiencing limited negative impact from the global supply chain disruptions or rising inflation. The Group has a basket of mitigation strategies to minimise the impact of further supply chain disruptions as well as cost inflation.
• Transformation Plan delivery on track, with the Group in line with or ahead of plan for six of the current financial year's operational KPIs.
• The Group is not providing guidance for the current financial year; the Board is comfortable with market consensus.

 

 

Financial Summary for the First Half FY2022

• Brand sales up 23% to £433m.
• Group revenue up 17.6% (up 21.4% in constant currency**) to £199.3m, driven by a return to retail growth and the partial relaxation of COVID restrictions globally.
• Gross margin* improved by 250 basis points to 55.7%, predominantly reflecting a stronger stance on Full Price sales.
• Reported Losses Before Tax reduced by £61.1m or 70.7% at £(25.3)m.
• Retail sales including eCommerce up 10.4% (up 14.1% in constant currency**) to £136.9m.
• eCommerce sales down on last year by 14.2% (down 12.2%in constant currency**) to £63.6m, as the sales performance was impacted by the move away from last year's heavy promotional stance in order to re-establish premium positioning.
• Growth over pre-COVID 2019 in Ecommerce now at 22%.
• Wholesale sales up 40.6% (up 45.2% in constant currency**) to £55.5m reflecting returning confidence in Ted product from our Trustees.
• Net cash of £12.7m at 14 August 2021, ahead of expectations through continuing discipline in managing working capital.

 

* Gross margin before non-underlying items, and restated for FY2021 to reclassify carriage costs into operating expenditure on a consistent basis with FY2022 .

**Constant currency compares the performance in local currency at the same exchange rate for both periods, thereby removing the FX impact in the movement between periods.

 

Operational and strategic highlights

We are now midway through the three-year strategic transformation programme we launched in June 2020. Even though some of the legacy issues facing the business have been amplified by COVID, our progress in executing this plan has been very encouraging. We have already largely completed delivery in a number of areas:

• Refreshing and strengthening of the Group's leadership.
• Recapitalisation of the business.
• Full operational and efficiency review.
• Significant cost action taken.
• Enhanced and strengthened operational and financial controls.
• Completed foundational work on product refresh and brand reenergisation.

 

We continue to focus on the three core pillars of the Transformation Plan which are:

• Refreshing and re-energising the product and brand.
• Prioritise digital and capital-light growth.
• Efficiency through Transformation

 

Our focus and execution against these pillars have supported continued progress and improving momentum within the first half.

 

1.  Re-energised product driving sales growth in line with expectations

• Sales momentum with growth rates in Q2 of 50% above last year.
• Sales mix of trend product (one of the product segments of the product pyramid) improved in Womenswear as customers adopt the new collections.
• Improving quarter-on-quarter LFL sales trend through the first half of the year, but with travel and commuting still well below previous levels, Ted is experiencing variable speeds of recovery across the channels and markets.

2.  Premium brand position demonstrating resilience

• Ted Baker recognised as amongst the most popular luxury brands in the UK in a YouGov survey.
• Full price sales mix up materially, with over 500bps improvement over last year.
• Gross Margin up 250bps on last year
• Basket of core brand metrics all showed sequential improvement since the start of the year.

 

3.  ESG credentials stronger

• Good progress towards target of 75% sustainable cotton in current financial year.
• The Group has set and submitted Carbon and Climate targets, representing a 46% carbon reduction, to the Science Based Targets Initiative.

 

4.  Growth and development in Digital and capital-light model

• Digital progress with the new eCommerce platform on track for the reschedule delivery date in early 2022.
• 9 new store openings in UK, Europe, North America, South Africa and Asia on capital-light model.

 

5.  Efficiency through Transformation

• Continuing cost savings in property, along with the £3.3m annual saving from the move to the new head office building.
• Net cash still positive at £12.7m at 14 August 2021. The Group guidance is upgraded to a net cash position by the end of the financial year to January 2022, one year earlier than previous guidance.

 

Current Trading and Outlook

The Group is reporting Q3 revenues, for the 12 weeks to 6 November 2021. Q3 trading has been impacted by ongoing COVID restrictions and subdued footfall into physical retail.  However, the Group has seen further sequential improvement in trends during the period, with further progress in trading margin as the Group continues to re-establish its premium position and full price sales mix increased further.

• Q3 FY22 Group revenue up 18% (up 20% in constant currency), driven by recovery in Retail store channel, Wholesale and Licencing.
• Retail stores up 34% (down 38% compared to Q3 FY20).  There remains sharp divergence in performance across our store groupings, with Town and City stores returning most strongly towards FY20 levels.  Our stores with exposure to Travel retail and International Travel remain significantly down as footfall remains weak.
• eCommerce was down 10% (up 4% vs. Q3 FY20). This reflected the highly promotional comparatives from prior year and stronger full price stance by the Group.
• Wholesale and Licence was up 24% (down 33% vs. Q3 FY20) reflecting ongoing recovery of store-based trustees and good progress from a number of product licences, including Next (Childrenwear and Lingerie), Baird (formal suiting) and both Eyewear partners.

 

• Trading margin for the combined Retail channel (stores and online) has increased by over 500bps, reflecting the Group reducing promotional levels.
• The Group remains on track or ahead of its six operational KPIs set for the financial year to January 2022, with the previously announced resetting of launch of the new eCommerce platform to early calendar 2022.

 

The Group is not providing guidance for the current financial year, but the Board is comfortable with market consensus.