There can be no doubt that Ted Baker has been among the hardest hit retailers during the Covid-19 pandemic. The retailer reported that its overall revenues plummeted by 47 per cent in its fourth quarter, as it was greatly impacted by the complete closure of its UK store portfolio. E-commerce was unable to offset this shortfall and declined by 1 per cent, underlining how Ted Baker’s product offer – which focuses on occasion and workwear – has suffered from Covid-19. No ordinary designer lab
label Ted Baker is a reminder of how quickly a retailer’s fortunes can change. The brand had previously been a stock market darling, having seen its share price increase six-fold between 2010 and 2018. This was largely driven by the success of its unique style of dapper tailoring and graphic floral prints, created by founder Ray Kelvin. Ted Baker is thought to be alter-ego of Kelvin and is described as “an intrepid aviator, an all-round sportsman and the consort of princesses and Hollywood beauties”. Founded in Glasgow in the late 1980s, the ethos of the brand has been to be “no ordinary designer label”. This was already on show in its first few stores, which offered a laundry service for every shirt purchased. Ted Baker’s style resonated with British shoppers, but found appeal elsewhere too following a global push from the early 2000s. It now operates stores and concessions in Europe, North America, Asia-Pacific and the Middle East. The brand’s unusual styling extends to its stores, many of which could be described as ‘Instagrammable’ before that was even a thing. But it never neglected ecommerce either: online sales accounted for over a quarter of Ted Baker’s retail sales prior to the pandemic. Ted’s fall from grace So where did it all go wrong? 2019 proved to be an extraordinarily difficult year, with Ray Kelvin forced to leave the business following allegations of ‘inappropriate hugs’ with staff. Kelvin’s right-hand man CFO Lyndsay Page took the helm, but quickly exited, following a dramatic plunge in profits and the discovery of accounting irregularities. However, it is unfair to say that Kelvin’s exit was the turning point. It could be argued that Ted Baker stuck too long to its formula of tailored officewear and floral prints and failed to adapt to the casual dressing trend. It also did not help that the management team had been unchanged for a very long time, with no fresh blood brought in to introduce new thinking. Things got worse in 2020. With many people stuck at home, there was little demand for occasionwear. Department store retailers – a key distribution channel for Ted Baker’s wholesale and concessions business – were also either struggling or had gone under in many key markets. Ted Baker had also never been a star performer when it comes to inventory, but found itself significantly overstocked as a result of the pandemic. Recovery plan focuses on inventory and more casual styles Ted Baker’s recovery plan – led by new chief executive Rachel Osborne – is attempting to rectify many of the issues that have held it back in recent years. The retailer launched a £100 million share issue to give it the ammunition needed to make some drastic changes. It also sold off its London head office, dubbed The Ugly Brown Building, for £78.8 million. Operationally, Ted Baker is reducing its three-year stock cycle to two years, and it is no longer fully committing to next season’s inventory anymore – leaving some room to react more quickly to trends. In terms of styles, the brand is also making a bigger push for more versatile and casual product – although this change of tack won’t become visible until summer 2021 due to lead times. Significant headwinds expected over coming years While Osborne’s plan is encouraging, it is clear that the group will be facing substantial headwinds over the coming years. This may likely lengthen the time needed for the recovery plan to complete or may even necessitate further strategic changes. For starters, margins are expected to remain under pressure from excessive discounting as the UK and other locations are currently still in lockdown. The retailer is expecting trading across its retail and wholesale channels to be negatively impacted by store closures until the end of May 2021. Meanwhile, Brexit has resulted in incremental costs of £5 million, as there have been extra duty and shipping costs. Whether Ted Baker succeeds will very much depend on what the post-Covid world will look like. The brand can’t move too far into a casual direction, as that would involve turning its back on everything it stands for. Yet, demand for more formal office attire may have peaked as working from home becomes a more permanent option.