We continue to invest in people and infrastructure to support
the future growth of Ted Baker. The Group is well positioned to
deal with the challenges and opportunities ahead, particularly
during the implementation of the new Microsoft Dynamics AX business
systems across the Group to support our future growth. We
anticipate that the roll out of these systems will commence at the
start of 2015 and whilst there will be an element of additional
costs whilst we run down our existing systems, we will continue to
ensure that our costs and commitments are controlled. Capital
expenditure in the current year is anticipated to be higher than
last year at GBP25m, in part due to the investment in new systems
across the business.
Retail
Our retail business has started the new financial year well, and
we are encouraged by the reaction to our Spring/Summer collections.
We continue to develop our UK business with store openings planned
in Glasgow and London Heathrow Terminal Two and the relocation of
our outlet store in York. Following the successful launch of our
new e-commerce platform, we will further develop our e-commerce
site to provide a more relevant customer experience and advance the
local content provided to our European customers, including
language options specific to key countries.
In continental Europe, we have recently opened further
concessions in France and the Netherlands with further openings
planned in Spain. We will also be opening a store in Marseilles in
May and an outlet store in Paris in March.
In the US, our growth continues with the opening of three new
stores as well as further concessions through a leading department
store. Following the successful UK launch, our US e-commerce site
will also undergo migration to the new platform in the year ahead;
delivering improved design, performance and personalised content
that creates a more relevant customer experience.
In Asia, following a year of significant expansion, we remain
focused on building brand awareness in these markets where we
remain in the relatively early stages of development. We have very
recently opened a concession through a leading department store in
Tokyo, Japan.
Wholesale
Our wholesale business is delivering a good performance that is
in line with our expectations. We anticipate further growth across
all of our wholesale businesses, which should result in low double
digit growth in sales in the coming year.
Licence Income
Our product and territorial licences continue to perform well
and are in line with our expectations.
Our licensed partners recently opened stores in Dubai and Egypt
with further openings planned in Saudi Arabia, Abu Dhabi, Taiwan
and Thailand during the year.
I am pleased to announce a new agreement with a licence partner
in Central America, who plans to open one new store in Panama
during the year.
Group
The Group continues to perform well and we remain focused on the
long term development of the Ted Baker brand. We are pleased with
the achievements we have made this year and look forward to another
year of progress across all markets and channels.
We intend to make our next interim management statement,
covering trading since the start of the financial year in mid June
2014.
David Bernstein
Non-Executive Chairman
20 March 2014
Strategic Report
Business Model and Strategy
Ted Baker is a global lifestyle brand that operates through
three main distribution channels: retail, which includes
e-commerce; wholesale; and licensing, which includes territorial
and product licences.
The brand has grown steadily from its origins as a single shirt
specialist store in Glasgow to the global lifestyle brand it is
today. We distribute through our own and licensed retail outlets,
leading department stores and selected independent stores in
Europe, North America, the Middle East, Asia and Australasia.
We offer a wide range of collections including: Menswear;
Womenswear; Global; Phormal; Endurance; Born by Ted Baker;
Accessories; Lingerie and Sleepwear; Childrenswear; Fragrance and
Skinwear; Footwear; Neckwear; Eyewear; and Watches.
Our strategy is to become a leading global lifestyle brand,
based on three main elements:
-- considered expansion of the Ted Baker collections. We review
our collections continually to ensure we anticipate and react to
trends and meet our customers' expectations. In addition, we look
for opportunities to extend the breadth of collections and enhance
our offer;
-- controlled distribution through three main channels: retail;
wholesale; and licensing. We consider each new opportunity to
ensure it is right for the brand and will deliver margin led
growth; and
-- carefully managed development of overseas markets. We
continue to manage growth in existing territories while considering
new territories for expansion.
Underlying our strategy is an emphasis on design, product
quality and attention to detail, which is delivered by the passion,
commitment and skill of our teams, licence partners and wholesale
customers ("trustees").
Key Performance Indicators
We review the on-going performance of the business using key
performance indicators for each of our distribution channels.
Performance measures for our retail business include total sales,
average and closing square foot, sales per square foot and gross
retail margins. Wholesale performance measures include total sales
and gross wholesale margins, and licence income is measured through
year on year revenue growth.
Business Review
GLOBAL GROUP PERFORMANCE
Retail
We operate stores and concessions across the UK, continental
Europe, North America and Asia and an e-commerce business based in
the UK, primarily serving the UK and Europe, with a separate
transactional website dedicated to the Americas and e-commerce
businesses with some of our concession partners.
The retail division delivered a strong performance with sales up
24.6% to GBP259.1m (2013: GBP208.0m). Average retail square footage
rose by 10.7% over the year to 303,951 sq ft (2013: 274,531 sq ft).
Total retail square footage at 25 January 2014 was 316,648 sq ft
(2013: 294,329 sq ft), an increase of 7.6% on the prior year.
Retail sales per square foot rose 11.0% from GBP703 to GBP780.
Sales through our e-commerce business increased by 55.7% to
GBP23.2m (2013: GBP14.9m). In November 2013, we launched a new
e-commerce platform for our UK site, providing increased
personalisation, local content for our overseas customers and
opportunities for future growth and multi-channel developments.
The retail gross margins were largely in line with last year at
66.1% (2013: 66.2%).
Retail operating costs increased in line with our expectations
to GBP122.2m (2013: GBP100.1m) and as a percentage of retail sales
decreased to 47.1% (2013: 48.1%). This resulted in an increase in
retail operating contribution to 18.9% (2013: 18.1%) of sales,
following significant expansion and store openings in the previous
year.
Wholesale
We currently operate a wholesale business in the UK serving
countries across the world, particularly in Europe and a wholesale
business in the US.
Group wholesale sales increased by 35.0% to GBP62.8m (2013:
GBP46.5m), reflecting a strong performance from our UK wholesale
business, which includes the supply of goods to our licensed stores
and our export business and a very good performance from our US
wholesale business. Gross margins declined to 43.4% (2013: 45.2%),
which was the result of a greater proportion of wholesale sales to
our licensed stores, which carry a lower margin and a slight
reduction in the underlying wholesale margin due to the product mix
in the first half of the year.
Licence income
We operate both territorial and product licences. Our
territorial licences cover the Middle East, Asia, and Australasia,
through which we operate licenced retail stores and, in some
territories, wholesale operations. Our product licences cover
lingerie & sleepwear, fragrance, watches, footwear, eyewear,
suiting, neckwear, skinwear, and childrenswear.
Licence income was up 18.4% to GBP8.9m (2013: GBP7.5m). We have
seen particularly good performances from our footwear collection
with our licenced partner, Pentland Group and our suiting business
in North America with licence partner Jack Victor. Our licensed
stores in the Middle East and Asia performed well during the
period.
Collections
Ted Baker Womenswear delivered a very good performance with
sales up 30.5% to GBP178.9m (2013: GBP137.1m). Womenswear benefited
from a greater proportion of new space added during the period and
as a result represented 55.6% of total sales (2013: 53.9%).
Ted Baker Menswear performed well with sales increasing by 21.9%
to GBP143.0m (2013: GBP117.4m). Menswear represented 44.4% of total
sales in the period (2013: 46.1 %).
GEOGRAPHIC PERFORMANCE
United Kingdom and Europe
Sales in our UK and Europe retail division were up 20.3% to
GBP198.6m (2013: GBP165.1m). This strong performance was delivered
in what remained a competitive trading environment.
Average retail square footage rose by 4.1% over the period to
212,745 sq ft (2013: 204,331 sq ft). At 25 January 2014 total
retail square footage was 218,622 sq ft (2013: 210,768 sq ft)
representing an increase of 3.7%. Retail sales per square foot
increased by 13.0% from GBP738 to GBP834.
During the year, we opened a new store in Gatwick South, further
concessions with leading department stores in France, Spain,
Germany and the Netherlands and an outlet store in Belgium. We are
pleased with their performances and positive about growth in these
markets.
Our first two stores in Turkey were opened with a licence
partner during the year and we are encouraged by their
performance.
At 25 January 2014, we operated 35 stores (2013: 35), 203
concessions (2013: 183), 11 outlet stores (2013: 10) and 2 stores
through a licence partner (2013: nil).
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