Ted Baker has mixed Q2 but is on the right path
Fresh from news of its link up with Secret Sales this week, on Tuesday Ted Baker issued a Q2 trading update and said that sales have been in line with expectations and it's seen a “significant improvement” in the full-price mix.
Covering the 16 weeks from April 25 up to August 14, the report combined both good news and bad and it's clear that the company – which was already struggling pre-pandemic – still has work to do. It said the continued Covid impact is leading to different speeds of recovery across its key markets but group sales have managed a 50% increase compared to Q2 a year ago.
Reported Retail sales increased 30% year-on-year (YoY) but were 30% below the figure in 2019 (2YoY).
Store sales were up 142% YoY and down 45% on a two-year basis. While many of its stores were open during the trading period, footfall stayed below prior levels and continued to be stronger in out-of-town and regional locations where it has a smaller physical presence.
But its non-metro centre stores continued to show “a healthy recovery”. It expects more of the same in H2 as metro centres and travel retail recover more slowly than its overall store estate given the ongoing slow recovery of international tourism and the still limited return to offices across the UK and other markets.
The company has been working hard to re-establish its premium positioning and move away from the aggressive markdown stance it took this time last year. But while that's a good thing in general, it did negatively impact the sales performance of its e-commerce operations compared to a year ago. Sales here fell 25% YoY but still accounted for 39% of the total. And they rose 17% 2YoY.
Wholesale and licence revenue increased by 151% YoY and decreased 29% 2YoY. Several of its newer licence partners have seen positive momentum during Q2, including Next and Baird.
And its eyewear licence partners, (“among the biggest in the group”), continued to show “robust performance”, up 72% YoY and up 27% 2YoY.
Trading momentum “continued to build through the period, with the last four-week exit rate for Retail better than the overall Q2 performance for Retail sales”.
And North American concessions, as well as North American and UK shopping malls are showing an “improved performance as consumer confidence recovered”.
The trading margin also improved over 500 bps due to a “significantly better full-price mix across all retail channels”.
The company also said that its brand remains strong with high awareness and popularity among UK consumers based on a recent YouGov survey, and its AW22 collections have been “positively received by Ted customers, with encouraging early sales”. It added that “newness [is] working well, with [a] positive response to new product pyramid structure”.
It has also made “good progress” on its work for its new e-commerce platform, but “some technical aspects have taken longer than expected to fully resolve”. Given “the proximity to the upcoming peak trading period and need to fully test its business readiness and stability ahead of implementation, we will move the go-live date to early 2022”.
While it said the date change will have “no material impact on the performance of our e-commerce business”, it will be a disappointment for the company given how important e-commerce is to fashion shopping these days. But it's a sensible decision to make, especially as some retailers have gone live with new e-commerce platforms in recent years and found technical issues denting sales when they should have been rising.
CEO Rachel Osborne was cautiously upbeat and said: “We have made encouraging progress, with trading over the second quarter. Our transformation programme remains on track, and we have moved forward on the three key pillars of our plan in refreshing and re-energising the product and brand, prioritising digital and capital light growth and through our cost savings programme.
“With our robust balance sheet and strong cash management we are well placed for the future. It is still early days in the recovery, but we are confident that Ted is starting to emerge from Covid a stronger and more resilient business.”
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