British fashion retailer Ted Baker said on Monday its half-year losses ballooned as coronavirus-led lockdowns dented retail sales, and warned of more pain from a no-deal Brexit as the European Union divorce deadline loomed.
Pippa Stephens, Retail Analyst at leading data and analytics company, GlobalData, comments:
‘‘Ted Baker’s troublesome performance comes as no surprise, since its specialism in formalwear increased its exposure to the impact of COVID-19, with many consumers shifting their spending towards casualwear or loungewear categories. While the retailer has attempted to adapt to these changing trends, it was too slow to mitigate falling sales in H1 2020/2021, with revenue almost halving by £143.8m to £169.5m. Pressure from competitors led Ted Baker to implement heavy discounting during the period, including a 50% off everything promotion over Black Friday, which as well as drastically denting profit margins, is also likely to have a significant impact on consumers’ perceptions of the brand. Full price sales must be a focus for Ted Baker as it launches its refreshed product ranges as part of its ‘Ted’s Growth Formula’ turnaround plan, or else it will risk devaluing the brand even further.
Online accounted for 59.8% of Ted Baker’s total sales during H1, and the retailer has been considerably upgrading its proposition, with the addition of more payment options like Klarna and Apple Pay, and virtual personal shopping appointments. After reporting falling online sales in FY2019/20, this investment was necessary since online spending is expected to be heightened in the long-term as a result of the pandemic, and so will allow Ted Baker to adapt more successfully to the evolving retail environment. However, lockdown measures and weakened footfall caused physical store sales to plummet during H1, with its concession relationship with Debenhams now a particular concern after its inevitable collapse last week.
Since the department store channel has experienced a steady decline in the UK over recent years, Ted Baker should start to decrease its dependence on this channel as quickly as possible, and instead focus on driving sales via its direct-to-consumer avenues, as well as its third-party online partners like Next and ASOS.
With Ted Baker’s two largest markets, the UK and USA, still reporting large numbers of COVID-19 cases daily and experiencing local restrictions, group sales remained weak in Q3, falling 40% as consumers continued to avoid visiting physical stores. Furthermore, the first four weeks of Q4 showed little improvement, with revenue still down 37%, as all of England’s stores were once again closed throughout its national lockdown, though Black Friday provided some respite online.
With the news of a COVID-19 vaccine hopefully enabling events like weddings and graduations to recommence next summer, Ted Baker can start to look forward to a resurgence in demand.
However, it must ensure that it increases its digital and social media marketing to boost top of mind appeal for the season, and until then should focus its campaigns on its more casual ranges as consumers will have less awareness of this offering.”