TIDMTED
RNS Number : 5005O
Ted Baker PLC
01 June 2020
Ted Baker Plc ("Ted Baker", the "Company")
Full Year Results for 52 weeks ended 25 January 2020
A detailed strategy and transformation plan for the Company
Ted Baker, the global British Lifestyle brand, today announces
its full year results for the year ended 25 January 2020, as well
as providing: an update on actions taken to strengthen the
business; a transformational strategy "Ted's Growth Formula", to
return the Company to profitable growth; a summary of its response
to Covid-19 and an update on current trading.
Ted Baker has separately today announced its intention to raise
approximately GBP95 million in gross proceeds (approximately GBP90
million in net proceeds) by way of a fully underwritten Placing and
Open Offer and Firm Placing of the newly-issued ordinary shares of
the Company. Up to a further approximately GBP10 million in gross
proceeds (up to approximately GBP9.6 million in net proceeds) may
also be raised by way of an Offer for Subscription which is not
underwritten (the "Offer for Subscription", together with the
Placing and Open Offer and Firm Placing, the "Capital Raising").
This capital raising will strengthen the balance sheet, allowing
the Company to navigate through the COVID-19 disruption and invest
in its future through the transformation plan.
Financial Results Overview
52 weeks ended 25 January 26 January Variance
2020 2019
------------ ------------
Total revenue GBP630.5m GBP639.6m (1.4%)
Gross profit as reported GBP307.1m GBP362.0m (15.2%)
Underlying gross profit GBP350.8m GBP382.2m (8.2%)
Underlying profit before GBP9.8m GBP63.0m GBP(58.2)m
tax and IFRS 16
Underlying profit before GBP4.8m GBP63.0m GBP(53.2)m
tax
Reported profit before tax GBP(79.9)m GBP30.7m GBP(110.5)m
Reported profit after tax GBP(70.4)m GBP24.5m GBP(94.9)m
---------------------------- ------------ ------------ ------------
-- Total revenue was down 1.4% to GBP630.5m, (down 2.4% in
constant currency) impacted by significant discounting as seen
across the apparel industry, particularly in the UK, in response to
weak consumer spending and channel shift to online.
o Retail revenues fell 4.6% (fell 5.4% in constant currency) to
GBP439.9m driven by:
-- Store revenues down 5.3% (down 6.3% in constant currency) to
GBP321.2m
-- eCommerce revenues were down 2.5% (down 3.1% in constant
currency) to GBP118.7m
o Wholesale revenues increased by 9.6% (up 8.1% in constant
currency) to GBP171.5m, benefitting from incremental footwear
revenue. On a comparable basis (excluding footwear), wholesale
revenues decreased 3.7% (decrease of 5.0% in constant currency) due
to challenging trading conditions for trustees and territorial
franchise partners.
o Licence revenues decreased 14.1% to GBP19.0m. Underlying
licence income increased 1.8%, adjusting for the acquisition of the
footwear licence, with a steady growth in both our product and
territory licences during the period.
-- Underlying gross margin of 55.6% (2019: 59.8%), impacted by
increased promotional activity, lower wholesale margin on footwear
and an active approach to inventory sell through, partially offset
by higher margin on retail footwear sales.
-- The 2019 Underlying Gross Margin has not been adjusted since
the financial statements of 21 March 2019 and excludes the impact
of inventory adjustments. The Group has restated the balance of
inventory at 26 January 2019 from GBP225.8 million to GBP205.6
million, a GBP20.2 million restatement. The restatement was due to
inappropriate cost values being attributed to inventory, inventory
reflected on the balance sheet which did not physically exist and
intercompany profit in stock that was not adjusted for in previous
calculations.
-- In addition, the Group has reviewed its approach to
estimating the carrying value of stock and adopted a more prudent
methodology which resulted in a GBP32.4 million reduction in stock
value being accounted for as a change in estimate booked as a
non-underlying expense in the income statement for the period ended
25 January 2020.
-- Underlying profit before tax and IFRS 16 was GBP9.8m (2019:
GBP63.0m), driven by the combination of gross margin pressure,
increased distribution and administrative costs.
-- Reported loss before tax was GBP79.9m (2019: profit of
GBP30.7m), a significant fall versus the prior year due to the
Group booking GBP84.6m of non-underlying expenses, mainly
comprising total charges of GBP45.8m related to inventory, GBP16.2m
related to impairment of store assets, GBP7.6m related to losses on
the disposal of the Asian business and GBP6.5m for legal and
professional costs. In addition, the application of IFRS16 for the
first time introduced charges of GBP5.0m.
The Board recognises that last year's performance was
disappointing for all of Ted Baker's stakeholders, reflecting a
challenging external environment as well as significant internal
disruption, driven by a number of senior leadership departures.
In response, Ted Baker today announces a comprehensive strategy
(Ted's Growth Formula) to transform the Company in the coming years
and see Ted Baker become a more profitable, cash generative
business delivering higher returns on capital employed.
Ted's Growth Formula
This strategy, underpinned by the proceeds from the capital
raising, will leverage the inherent strengths of the Company. These
strengths are: Ted Baker's strong and resilient brand; its
diversified footprint (such as through retail, wholesale and
licence channels, product category and geographic presence);
combined with substantial historical investments that have been
made in the last five years (over GBP65m invested across IT, CRM,
logistics and infrastructure); and a strong culture carried by a
passionate and engaged team.
The strategy will build on those strengths and is based on three
key building blocks: stabilising the foundations, driving growth,
and enhancing operational excellence.
Building Block 1: Stabilise the Company's foundations
The Company's initial focus has been on stabilising the
business. These actions, which are largely complete, include:
-- Refreshing and strengthening the Company's leadership. The
appointment of the new Chair, John Barton; permanent CEO, Rachel
Osborne; permanent CFO, David Wolffe; Chief Customer Officer,
Jennifer Roebuck; Chief People Officer, Peter Collyer; and Global
Creative Director, Anthony Cuthbertson, bring new experience and
depth to the Board and the executive team. Ted Baker now has
strengthened Board governance and a smaller, focused executive team
with clear lines of responsibility.
-- Responding effectively to COVID-19. We have taken swift
action to protect the business, our customers and our
colleagues.
-- Recapitalising the business. A restructuring of our debt
arrangements, the sale and leaseback of the Company's head office
to reduce indebtedness, and the proposed capital raising announced
today will ensure the Company can navigate through the current
Covid-19 disruption and invest in the transformation plan and
future of Ted Baker.
-- Management has undertaken a full operational efficiency
review, supported by Alix Partners. This will reduce head office
costs, both in the UK and North America, and has allowed us to
simplify the organisation and reset the business with better ways
of working and cost savings. After year end, the Company announced
that this reorganisation will achieve GBP5 million of cost savings
for the current financial year, with GBP2.7 million exceptional
cash costs to achieve these savings and will result in GBP7 million
of annualised savings.
-- Rethinking Ted Baker's vision and commercial strategy. The
strategy can be characterised by the following two building blocks
and when delivered, the Company will be more cash generative and
produce a higher return on capital employed than in the past.
Building Block 2: Driving Growth
Ted Baker has identified five primary drivers of top line growth
to focus on as part of its transformation strategy :
-- Attract more customers : Gain higher share of wallet and
lifetime value through deeper and broader relationships with new
and existing customers, by leveraging of insights, analytics and
online engagement, to increase customer acquisition, frequency and
conversion online.
-- Be 'no ordinary brand' : Re-energise the brand and creative
direction for all consumer touch points, to increase engagement,
awareness and purchase consideration.
-- Expand our product and its relevance : Make clothing more
relevant to all day / week occasions; drive accessories, footwear
and large licence partner categories
-- Be forward thinking : Retain relevance of business model;
keeping ahead of industry trends through internal R&D function
and capability
-- Profitably be where the customer is : Reach customers in
prioritised territories through the appropriate distribution and
service model, in a profitable way.
Building Block 3: Operational Excellence
Going forward, Ted Baker will operate under the core philosophy
of 'Simpler, Smarter, Together'. By getting the basics rights and
operating more efficiently and collaboratively the Company sees
significant scope to improve profitability and cash generation. The
Company is focused on creating a digital and data enabled operating
model, a high-performance business culture, and a commercial and
agile approach. The Company has established a transformation
programme team, with proven operational expertise to help support
the delivery of these initiatives and achieve the potential
benefits.
-- Operate with a 'digital first' mentality: Upgrade and enhance IT systems
o Focus on critical systems enablers such as an upgraded
e-commerce platform and new payment service provider gateway to
enable a much broader set of payment options for customers;
enhanced internal systems to improve efficiency; enhanced store and
omnichannel service for enhanced insights.
-- Create a high performing business culture
o Established three pillars to enhance the team's performance:
direction, dynamics and delivery. In future years, the focus will
be on developing and embedding capabilities and ways of working as
well as a continuous improvement mentality.
-- A more commercial and agile business, a more effective organisation
o Scope for significant improvement in gross margin through a
series of structural bought-in margin improvements. The Company
plans to change how it buys goods (streamlining its critical path
and reducing sampling), who it buys from (consolidation of its
supplier base) and where it buys from (relocation of sourcing
markets). Product margin can be further enhanced through the
purchase of products throughout the season in response to customer
preferences, reworked margin on outlet products and more
sophisticated promotional activity.
o Continued focus on working capital efficiency. Historically,
the Company has operated with too much inventory, which has
negatively impacted cash flow. Despite improvements in working
capital efficiency over the last 12 months (with an improvement in
underlying net working capital to sales ratio from 27.5 per cent.
to 15.8 per cent.) the Company is highly confident it can achieve a
further material improvement through shortening its product
lifecycle from three years to two.
o Reduce operating expenditure. The Company's recent cost review
concluded the business is carrying high costs in several areas,
including logistics and distribution, the head office and stores.
As a result, it intends to renegotiate carrier arrangements, reduce
requirements for air freight and implement productivity
improvements in its Derby and Atlanta Distribution Centres which
will further reduce the cost base within the business in addition
to the annualised GBP7 million of cost savings relating to head
office costs.
o Improve retail store profitability. The Company has conducted
a thorough review of retail stores across all territories, with a
critical focus on rental costs and payroll. It has identified
significant cost saving potential on store payroll driven by new
ways of working; the transformation team is in ongoing discussions
with landlords across all territories and Directors remain
confident in the Company's ability to reduce rental costs.
Much of the work to achieve operational excellence is considered
self-help and the Board is therefore confident in delivering these
initiatives without improvement in the retail environment across
the Company's markets.
FY21 Guidance and Medium Term Targets
Based on current expectations for the economic outlook, and Ted
Baker's performance through and beyond COVID-19 (further detail
around the scenarios planned for are included in the separate
capital raising announcement, also released today), the Company
expects to deliver the following progress in FY21:
-- Structural bought-in margin improvement: Consolidation of supplier base from 150+ to 100
-- Continued focus on working capital efficiency: Reduce stock cycle from three to two years
-- Reduced expenditure: Further central headcount reduction; Limit capex to GBP15m annually
-- Improved retail store profitability: Global payroll costs reduction
-- Increased controls: Implementation of new improved control
environment; Simplified organisational structure
The Board has also provided financial targets to FY2023 which
are:
-- Medium-term revenue growth of 5%
-- EBITDA margin of 7% to 10% in FY 2023
-- Free cash flow generation, after capex, of at least GBP30m by FY 2023
-- Net debt to EBITDA ratio of 1.0x or less by FY 2023
Current Trading and Response to COVID-19
Current trading has been significantly impacted by COVID-19, but
online revenues have been strong, reflecting the resilience of our
brand, customer loyalty and recently implemented trading and
marketing initiatives.
-- Company revenue down 36% for the 14 week period from 26
January 2020 to 2 May 2020 (the "Period"), compared to the same
period last year.
-- Total retail sales (including online) down 34%
o Retail online channel grew strongly up 50% in the period, up
78% in the 6 weeks from 22 March 2020.
-- Wholesale sales for the period down 40%; Licence income for
the period down 34% reflecting lockdown measures around the
world
Ted Baker's plans for the future build on a number of critical
actions that have already been taken by the Board and Leadership
Team, particularly in response to COVID-19, in order to protect our
customers, our colleagues and the business as a whole.
In addition to an intensive focus on our online business, an
extensive cash preservation programme has been put in place,
delivering permanent cash flow savings of GBP138.4m and deferring
GBP10.9m of cash payments:
-- The Company has deferred all non-essential capital
expenditure, stopping discretionary operating expenses, severely
restricting travel, executive pay has been voluntarily reduced by
15%, and landlord and supplier negotiations are ongoing.
-- The Company has benefited from the Government's support
through the Government's Coronavirus Job Retention Scheme (85% of
the workforce is currently on furlough), and Business Rates
holiday.
The Company has also started to gradually reopen stores,
primarily in Europe and planning for further re-openings is
underway as governments begin to relax lockdown rules.
Rachel Osborne, Chief Executive Officer, commented:
" Today we are excited to launch 'Ted's Formula for Growth', a
comprehensive strategy for the Ted Baker brand which is supported
by a significant recapitalisation of the business, that strengthens
our position and enables us to both execute that transformation,
and navigate through the disruption caused by COVID-19.
The Ted Baker brand is much loved, it has a unique personality
and character built up over many decades, and that provides us with
a remarkably strong foundation from which to continue our
international growth. Over the past 6 months our new executive team
have pulled together and undertaken a thorough review of the
business, identified key opportunities and acted decisively in a
number of areas. I would like to thank each and every one of our
team at Ted Baker for their extraordinary commitment over the past
few months and I look forward to working with them to deliver this
transformation and the exciting opportunities ahead.
I am confident that our transformation plan will enable us , Ted
Baker, to capitalise on our opportunities and deliver value for all
of our shareholders."
CONTACT DETAILS
Ted Baker
Investor.relations@tedbaker.com
Rachel Osborne, Chief Executive Officer
David Wolffe, Chief Financial Officer
Phil Clark, Commercial and Strategy Director
Tulchan Communications (Financial PR)
Tel: +44 (0) 20 7353 4200
Michelle Clarke / Jonathan Sibun / Will Palfreyman
E: tedbaker@tulchangroup.com
Investor & Analyst presentation and Q&A:
Management will host an analyst and investor presentation
followed by Q&A. This will commence at 9.00 am on 1(st) June
2020.
Please follow the link below to access the presentation through
a webcast, or alternatively use the dial in if you would like to
ask a question:
https://webcasting.brrmedia.co.uk/broadcast/5ebebab631da814c9fc71b74
Dial in number : +44 (0)330 336 Confirmation Code: 9714751
9411
This release may contain certain forward-looking statements,
forecasts, estimates, projections and opinions ("Forward
Statements"), which are based on current assumptions and estimates
by the management of Ted Baker. These Forward Statements can be
identified by the use of forward-looking terminology, including,
without limitation, the terms "believes", "estimates",
"anticipates", "expects", "intends", "plans", "may", "will" or
"should" or, in each case, their negative or other variations or
comparable terminology. By their nature, Forward Statements involve
known and unknown risks, uncertainties, assumptions and other
factors because they relate to events and depend on circumstances
that will occur in the future whether or not outside the control of
the Company. Past performance cannot be relied upon as a guide to
future performance and should not be taken as a representation that
those trends or activities underlying past performance will
continue in the future. No representation is made or will be made
that any Forward Statements will be achieved or will prove to be
correct. Actual future results, operations and circumstances could
vary materially from the Forward Statements. Similarly, no
representation is given that the assumptions disclosed in this
release upon which Forward Statements may be based are reasonable.
The recipient acknowledges that circumstances may change and the
contents of this release may become outdated as a result. The
Company and its respective Associates and advisers undertakes no
obligation to update these Forward Statements, which speak only as
at the date of this release, and will not publicly release any
revisions that may be made to these Forward Statements, which may
result from events or circumstances arising after the date of this
release.
This release is not an offer to sell or a solicitation of an
offer to buy any securities in the United States. The securities
referred to herein may not be offered or sold in the United States
absent registration or an exemption from registration under the
U.S. Securities Act of 1933, as amended (the "Securities Act") and
in accordance with any applicable securities law of any state or
other jurisdiction of the United States. The Company does not
intend to register any portion of the offering in the United States
or to conduct a public offering of any securities in the United
States.
The release does not constitute or form part of, and should not
be construed as, an offer to sell or issue, or an invitation to
purchase or subscribe for, or the solicitation of an offer to
purchase, subscribe to or acquire, securities of the Company, or an
inducement to enter into investment activity in any country,
including the United States, the Commonwealth of Australia, its
territories and possessions, Canada, Japan, the Republic of South
Africa and Switzerland or in any other jurisdiction in which such
offer, solicitation, inducement or sale would be unlawful prior to
registration, exemption from registration or qualification under
the securities laws of such jurisdiction. No part of this release,
nor the fact of its existence or distribution, should form the
basis of, or be relied on in connection with, any contract or
commitment or investment decision whatsoever.
Business Review
Territory and Distribution
The Ted Baker brand operates globally through three main
distribution routes: retail, which includes concessions and
eCommerce; wholesale; and licensing, which includes territorial and
product licences. As part of our strategy we shall review by
territory our optimal customer proposition and routes to market.
This will enable Ted Baker to optimise and to grow our territory
presence through a joined up and collaborative channel approach,
while ensuring the controlled distribution of our product.
Retail
Our retail comprises stores, concessions and eCommerce,
providing an omni-channel experience. We operate stores and
concessions across the UK, Europe, North America and the Rest of
the World, and localised eCommerce sites in the UK, continental
Europe, the US, Canada and Australia. We also have eCommerce
businesses with some of our concession partners. Our unique stores
showcase the Ted Baker brand and are key to the growth and success
of our eCommerce business. The relatively low number of our own
stores and higher number of concession locations allows us to
maintain a flexible store business model.
Retail sales decreased by 4.6% (decrease of 5.4% in constant
currency)(1) to GBP439.9m (2019: GBP461.0m). We continue to
experience unprecedented trading conditions within the retail
industry which has heavily impacted our performance. The structural
transition from physical stores to digital retail, alongside a
cyclical downturn, has resulted in intense pressures on physical
retail, changing customer behaviour and declining demand. This has
led to a dramatic increase in promotional activity and the most
intense level of competitive discounting across the retail
sector.
The overall decline in retail sales of 4.6% (decline of 5.4% in
constant currency)(1) compares to an increase in average retail
square footage of 2.6% to 442,790 sq ft (2019: 431,646 sq ft).
Retail sales per square foot (excluding eCommerce) decreased 7.7%
(decrease of 8.6% in constant currency)(1) to GBP725 (2019: GBP786)
demonstrating the challenging external trading conditions together
with changing customer behaviour as customers continue to shift
from physical to digital retailing.
The retail gross margin decreased to 59.9% (2019: 63.1%) as a
result of increased promotional activity and deeper discounting in
response to the extremely difficult trading conditions experienced
during the period.
Retail operating costs increased by 0.1% (an increase of 0.5% in
constant currency)(1) to GBP232.2m (2019: GBP231.9m) and as a
percentage of retail sales, increased to 52.8% (2019: 50.3%).
Wholesale
Our wholesale business sells to the UK, Europe and North
America, as well as supplying products to stores operated by our
territorial licence partners and our joint venture partners.
Group wholesale sales increased by 9.6% (increase of 8.1% in
constant currency)(1) to GBP171.5m (2019: GBP156.5m). The period
benefited from incremental footwear revenue, following the
acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA
LLC, which completed on 1 January 2019. On a comparable basis
(excluding footwear), wholesale sales decreased by 3.7% (decrease
of 5.0% in constant currency)(1) . UK & Europe sales decreased
by 7.1% (decrease of 7.1% in constant currency) to GBP92.5m (2019:
GBP99.5m), and North America sales increased by 2.3% (decrease of
1.4% in constant currency)(1) to GBP58.0m (2019: GBP56.7m). This
disappointing performance reflects the very challenging trading
conditions which are also impacting both our UK and North America
trustees as well as our territorial licence partners across the
world.
The wholesale gross margin decreased to 39.8% (2019: 44.1%).
This was partly as a result of the introduction of footwear, which
carries a lower margin, as well as a more proactive approach to
inventory sell through as part of our working capital initiatives
resulting in a higher mix of off-price sales compared to the prior
year.
Collections
Ted Baker womenswear sales decreased by 3.1% to GBP370.4m (2019:
GBP382.2m) and represented 60.6% (2019: 61.9%) of total sales. Our
womenswear product performance has been particularly disappointing
with missteps on both buying and design as a result of changes in
the team. This has since been addressed with new creative talent
being brought in towards the end of year and their impact is
already being felt across our design teams. Performance was further
affected by unseasonal weather patterns. Ted Baker menswear sales
were up 2.5% to GBP241.1m (2019: GBP235.2m) and represented 39.4%
of total sales (2019: 38.1%).
Licence Income
We operate both territorial and product licences. Our licence
partners are carefully selected as experts in their field and share
our passion for unwavering attention to detail and firm commitment
to quality. Our product licence partners manufacture and distribute
their products independent to Ted Baker but with our careful
overview and sign off on the product design and style so as to
balance and enhance each other and our business.
Product licences include bedding, beauty, watches, underwear
& lingerie, phone cases and luggage. We look to expand our
lifestyle licence product ranges to complement our apparel business
and customer aspirations.
On 1 January 2019, we acquired the issued share capital of No
Ordinary Shoes Limited and No Ordinary Shoes USA LLC from Pentland
Group. Pentland previously held the exclusive global licence to
manufacture and distribute footwear under the Ted Baker brand and
therefore the licence income earned ceased from the acquisition
date.
Licence income decreased by 14.1% to GBP19.0m (2019: GBP22.1m).
However, u nderlying growth in licence income was 1.8%, adjusting
for the acquisition of the footwear licence. We saw a steady growth
in both our product and territory licences during the period
despite a number being impacted by the external trading conditions.
During the period, two new product licensees commenced trading: a
new men's underwear and loungewear global licence with Delta Galil
and a global watch licence with Timex Group. Both partners reflect
our commitment to working with the best product specialists who
support our status as a global lifestyle brand.
In August 2019, the Group was pleased to announce a new product
licence agreement with Next Plc to accelerate the expansion of Ted
Baker's childrenswear collections given the significant growth
potential we see in this area. Next will create and sell Ted Baker
childrenswear products spanning baby, boys' and girls' clothing,
shoes and accessories in collaboration with the creative team at
Ted Baker. The new collections launched in Spring 2020 and are
being sold through Next's retail channels and wholesale
relationships as well as through Ted Baker's websites.
Geographic Performance
United Kingdom and Europe
52 weeks 52 weeks Variance Constant
ended ended 26 currency
25 January January variance(1)
2020 2019
Total revenue GBP422.6m GBP436.8m (3.3%) (3.1%)
------------ ---------- --------- -------------
Total retail revenue* GBP296.9m GBP315.0m (5.7%) (5.5%)
------------ ---------- --------- -------------
Store revenue GBP202.3m GBP217.0m (6.8%) (6.4%)
------------ ---------- --------- -------------
eCommerce revenue GBP94.6m GBP98.0m (3.5%) (3.4%)
------------ ---------- --------- -------------
Average square footage* 284,533 272,554 4.4%
------------ ---------- --------- -------------
Closing square footage* 291,557 279,312 4.4%
------------ ---------- --------- -------------
Sales per square foot
including eCommerce sales GBP1,043 GBP1,156 (9.8%) (9.5%)
------------ ---------- --------- -------------
Sales per square foot
excluding eCommerce sales GBP711 GBP796 (10.7%) (10.4%)
------------ ---------- --------- -------------
Wholesale revenue GBP106.7m GBP99.7m 7.0% 7.0%
------------ ---------- --------- -------------
Licence income GBP19.0m GBP22.1m (14.1%) (14.1%)
------------ ---------- --------- -------------
Own stores 46 40 6
------------ ---------- --------- -------------
Concessions 242 254 (12)
------------ ---------- --------- -------------
Outlets 22 21 1
------------ ---------- --------- -------------
Partner stores 11 8 3
------------ ---------- --------- -------------
Total 321 323 (2)
------------ ---------- --------- -------------
* Excludes licensed partner stores
Retail sales in UK and Europe decreased by 5.7% (decrease of
5.5% in constant currency) to GBP296.9m (2019: GBP315.0m) as a
result of the deeply challenging external retail environment. In
the UK, these pressures have been exacerbated by the significant
impact on consumer sentiment and spending from Brexit and political
uncertainty during the period.
ECommerce sales decreased by 3.5% to GBP94.6m (2019: GBP98.0m)
with sales impacted by the unprecedented trading conditions
detailed above as well as the performance of the Group's UK trading
partners. As a percentage of UK and Europe retail sales, eCommerce
sales represented 31.9% (2019: 31.1%). Our eCommerce channel will
be a core area of capital investment for us in the year ahead to
ensure we drive revenue growth in online sales. We also plan to
optimise the new CRM system which we implemented at the end of
2019. The new system provides us with a complete single view of our
customers across channels enabling us to further personalise
content and experiences for each customer, ultimately generating
increased customer lifetime value and helping us to grow our
customer base.
Sales per square foot excluding eCommerce decreased 10.7%
(decrease of 10.4% in constant currency)(1) to GBP711 (2019:
GBP796) reflecting changing customer behaviour as customers move to
online. However, our stores remain key to the success of the
eCommerce business through initiatives such as order in store and
click and collect as well as showcasing the brand and the
collections and contribute a healthy financial return.
During the year, our expansion continued across the UK and
Europe. We opened three short term leases in the UK in Stratford,
Lakeside and Cardiff, all with encouraging starts. We also
continued our expansion in Europe with store openings in Hamburg,
Madrid and Antwerp. We have made several strategic decisions to
exit underperforming concession stores during the period, the
majority of which were in Spain and France. After the period, we
closed our outlet store in Serravalle, which represented our only
store in Italy. We opened licence partner stores in Croatia,
Ukraine and Malta. We are pleased with the performance of the new
openings and remain positive about further growth opportunities for
our brand across these markets.
Sales from our UK wholesale business, which include our
wholesale export business and the supply of product to our retail
licence partners, increased by 7.0% to GBP106.7m (2019: GBP99.7m),
reflecting footwear sales following the acquisition of the footwear
business in January 2019. Excluding this, sales from our UK
wholesale business decreased by 7.1%, with our trustees and licence
partners also having been impacted by the very difficult trading
conditions.
North America
52 weeks 52 weeks Variance Constant
ended ended currency
25 January 26 January variance(1)
2020 2019
Total revenue GBP194.6m GBP182.4m 6.7% 2.9%
------------ ------------ --------- -------------
Total retail revenue* GBP129.8m GBP125.7m 3.3% (0.3%)
------------ ------------ --------- -------------
Store revenue GBP107.7m GBP105.1m 2.5% (1.1%)
------------ ------------ --------- -------------
eCommerce revenue GBP22.1m GBP20.6m 7.3% 3.4%
------------ ------------ --------- -------------
Average square footage* 138,152 131,678 4.9%
------------ ------------ --------- -------------
Closing square footage* 139,822 137,031 2.0%
------------ ------------ --------- -------------
Sales per square foot
including eCommerce sales GBP940 GBP955 (1.6%) (5.0%)
------------ ------------ --------- -------------
Sales per square foot
excluding eCommerce sales GBP780 GBP798 (2.3%) (5.7%)
------------ ------------ --------- -------------
Wholesale revenue GBP64.8m GBP56.8m 14.1% 10.0%
------------ ------------ --------- -------------
Own stores 38 37 1
------------ ------------ --------- -------------
Concessions 64 61 3
------------ ------------ --------- -------------
Outlets 12 12 -
------------ ------------ --------- -------------
Partner Stores 26 20 6
------------ ------------ --------- -------------
Total 140 130 10
------------ ------------ --------- -------------
* Excludes licensed partner stores
We are confident that the Ted Baker brand is becoming more
established and continues to gain recognition in this territory as
reflected by the steady growth seen in the eCommerce and wholesale
channels despite trading in a tough external retail environment and
unseasonable weather experienced across North America in the early
part of the period.
Sales from our retail division in North America increased by
3.3% (decrease of 0.3% in constant currency)(1) to GBP129.8m (2019:
GBP125.7m) with sales per square foot (excluding eCommerce sales)
decreasing by 5.7% in constant currency(1) . Performance was
impacted by unseasonable weather across North America in the early
part of the period and the very difficult trading conditions
experienced throughout the period.
In the period, we opened a new store in Detroit and three
further concession stores.
Our eCommerce business delivered an encouraging performance with
sales increasing by 7.3% (3.4% in constant currency)(1) to GBP22.1m
(2019: GBP20.6m). As a percentage of North America retail sales,
eCommerce sales represented 17.0% (2019: 16.4%).
Sales from our North American wholesale business increased by
14.1% (10.0% in constant currency)(1) to GBP64.8m (2019: GBP56.8m),
reflecting the acquisition of the footwear business. Excluding
this, sales increased by 2.3% (decrease of 1.4% in constant
currency)(1) with our performance being impacted by key trustees
taking a more cautious stance with their order books.
Rest of the World
52 weeks 52 weeks Variance Constant
ended ended currency
25 January 26 January variance(1)
2020 2019
Total retail revenue* GBP13.3m GBP20.3m (34.5%) (35.2%)
------------ ------------ --------- -------------
Store revenue GBP11.2m GBP17.2m (34.9%) (35.4%)
------------ ------------ --------- -------------
eCommerce revenue GBP2.1m GBP3.1m (32.3%) (33.9%)
------------ ------------ --------- -------------
Average square footage* 20,105 27,414 (26.7%)
------------ ------------ --------- -------------
Closing square footage* 7,104 26,706 (73.4%)
------------ ------------ --------- -------------
Sales per square foot
including eCommerce sales GBP662 GBP740 (10.5%) (11.6%)
------------ ------------ --------- -------------
Sales per square foot
excluding eCommerce sales GBP558 GBP627 (11.0%) (12.0%)
------------ ------------ --------- -------------
Own stores 4 11 (7)
------------ ------------ --------- -------------
Concessions 0 11 (11)
------------ ------------ --------- -------------
Outlets 0 1 (1)
------------ ------------ --------- -------------
Partner stores 98 84 14
------------ ------------ --------- -------------
Total 102 107 (5)
------------ ------------ --------- -------------
* Excludes licensed partner stores
During the period, we completed two strategic deals to
accelerate Ted Baker's expansion in the Asian market, completing
the reorganisation of our operations in the region.
In October 2019, the Group entered into a joint venture
agreement with Shanghai LongShang Trading Company Ltd, where they
would acquire 50% of our existing business to further develop the
brand in People's Republic of China including Hong Kong S.A.R. and
Macau S.A.R. This joint venture will drive the long-term growth of
Ted Baker in these markets, combining extensive local knowledge
with the proven global buying, merchandising, training and
brand-building expertise of Ted Baker.
Secondly, in August 2019, the Group announced the appointment of
a new licence partner in Japan, Sojitz Infinity ("Infinity").
Infinity represents a strong partner to drive the long-term
expansion of the Ted Baker brand in Japan, bringing significant
local expertise, in particular within the department store
sector.
Total retail revenue decreased as sales in Hong Kong, China and
Japan ceased following these transactions and this explains the
reduction in revenue against the prior year.
The joint venture with our Australasian licence partner, Flair
Industries Pty Ltd, continued to perform well. As at 25 January
2020, we operated nine stores in Australasia (2019: nine stores).
We also continue to operate in South Africa via a wholly owned
subsidiary and in the year opened two stores to now trade from four
stores.
Notes:
(1) Constant currency comparatives are obtained by applying the
exchange rates that were applicable for the 52 weeks ended 26
January 2019 to the financial results in overseas subsidiaries for
the 52 weeks ended 25 January 2020 to remove the impact of exchange
rate fluctuations.
The Directors believe this measure provides a consistent and
comparable view of the underlying performance of the Group's
ongoing business.
Financial Review
Revenue and gross margin
Group revenue decreased by 1.4% (decrease of 2.4% in constant
currency)(1,5) to GBP630.5m (2019: GBP639.6m), driven by a 4.6%
decrease (decrease of 5.4% in constant currency)(1) in retail sales
to GBP439.9m (2019: GBP461.0m), a 14.1% decrease in licence
income(5) to GBP19.0m (2019: GBP22.1m), offset by a 9.6% increase
(8.1% in constant currency)(1) in wholesale sales to GBP171.5m
(2019: GBP 156.5m ). On a comparable basis (excluding footwear),
wholesale sales decreased by 3.7% (decrease of 5.0% in constant
currency)(1) . As mentioned above and within the Chair's Statement,
at page 5 in the Group's annual report and accounts, revenue was
impacted by several factors during the year including challenging
trading conditions characterised by changing customer behaviour,
weak consumer spending, intense pressure on physical retailing and
unseasonal weather across our global markets. These pressures have
been further exacerbated by macroeconomic uncertainty in many of
our global markets, particularly in the UK where political
uncertainty caused by Brexit has affected customer demand.
The Group's underlying gross margin was lower at 55.6% (2019:
59.8%), with the retail margin of 59.9% (2019: 63.1%) and wholesale
margin of 39.8% (2019: 44.1%) both significantly lower than the
prior year. The difficult trading environment resulted in lower
margins primarily due to an unprecedented and sustained level of
promotional activity across the sector, with distressed discounting
from some brands and retailers, and heightened competition. The
wholesale gross margin was further impacted by the annualised
effect of the acquisition of the footwear business which carries a
lower gross margin.
Operating expenses
Distribution costs, which comprise the cost of retail operations
and distribution centres increased by 7.5% to GBP268.5m (2019:
GBP249.8m). Distribution costs excluding non-underlying costs and
IFRS 16(2) increased by 2.9% (1.9% in constant currency)(1) to
GBP247.4m (2019: GBP240.5m) and as a percentage of sales increased
to 39.2% (2019: 37.6%). The increase is due to inflationary cost
increases, higher warehouse and depreciation costs and a result of
the annualisation of costs associated with operating the footwear
business which was acquired in January 2019.
Administrative costs increased by 26.5% to GBP100.9m (2019:
GBP79.8m). Administration expenses excluding non-underlying
costs(2) increased by 14.8% (13.9% in constant currency)(1) to
GBP88.3m (2019: GBP76.9m). This increase is due to inflationary
cost increases, higher headcount costs arising from the continued
investment in our people, including the additional headcount to
support the footwear business which was acquired in January 2019,
as well as a higher depreciation and amortisation charge from prior
year investments in systems.
During the period, the Group adopted IFRS 16 'Leases' for the
first time. IFRS 16 specifies how to recognise, measure, present
and disclose leases and replaces IAS17 'Leases'. The Group adopted
IFRS 16 from 27 January 2019 using a simplified modified
retrospective transition approach, under which the comparative
information presented for the 52 weeks ended 26 January 2019 has
not been restated and therefore continues to be shown under IAS17.
The net impact on profit before tax for the period was a net
expense of GBP5.0m. Further information is provided in Note 1(a) to
the Financial Statements.
Profit before tax and non-underlying items and IFRS 16 (3) and
Loss/profit before tax
The loss before tax was GBP79.9m (2019: profit of GBP30.7m).
Profit before tax and non-underlying items and IFRS 16(3) was
GBP9.8m (2019: GBP63.0m).
Non-underlying items (2)
Non-underlying items before tax in the period amounted to
GBP84.6m (2019: GBP32.3m) and comprised of the following items
expenses/(income):
52 weeks 52 weeks
ended ended
25 January 26 January
2020 2019
-------------------------------------------- --------------------------------- ------------
GBP'000 GBP'000
Changes in estimates for inventory 32,351 -
Change to inventory obsolescence provision
from change in commercial strategy 13,539 -
Inventory errors or misstatement - 20,201
Loss on disposal of Asian business 7,585 -
Impairment of property, plant and equipment
and right-of-use assets 16,200 8,717
Other (net) 739 -
Provision for specific trade and other
receivables - 557
Acquisition costs and unwind of fair
value accounting adjustments 4,710 1,740
Legal and professional costs 6,484 1,094
Foreign exchange on the translation of
intercompany balances 3,026 -
--------------------------------- ------------
Non-underlying items 84,634 32,309
--------------------------------- ------------
Further details can be found in Note 1(w) and Note 3 to the
Financial Statements.
Finance income and expenses
Net interest payable was GBP15.5m (2019: GBP4.2m). The IFRS 16
interest expense for the period was GBP8.3m. As the Group applied
the simplified modified retrospective transition approach to IFRS
16, the 2019 comparatives have not been restated. Excluding the
impact of IFRS 16 and non-underlying items, net interest payable
was GBP4.1m (2019: GBP4.2m).
Taxation
The Group tax credit for the period was GBP9.4m (2019: charge of
GBP6.2m), an effective tax rate of 11.8% (2019: 20.2%). This
effective tax rate is lower than the UK tax rate for the period of
19% due, primarily, to the Group being loss making in territories
where it has major market operations and due to the utilisation of
previously unrecognised tax losses in territories with higher tax
rates.
Earnings per share and dividends
The basic loss per share was 158.0 p (2019: earnings per share
55.0p). Underlying earnings per share, which exclude non-underlying
items and IFRS 16(4) , decreased by 60% to 22.0p (2019: 55.0p).
The final dividend for the year has been temporarily suspended
by the Board. An interim dividend of 7.8p per share was paid during
the period, compared to a total dividend per share for the prior
period amounting to 58.6p.
Cash Flow
Net cash and cash equivalents increased by GBP38.3m to GBP52.9m
as at 25 January 2020 as the Group drew down on its borrowing
facilities. In light of the lower profitability, the Directors took
actions to manage cash by reducing capital expenditure, managing
working capital primarily by reducing stock levels and temporarily
suspending dividends. Accordingly, net debt increased by GBP3.3m
from GBP123.8m to GBP127.1m.
Overstatement of inventory
We announced on 2 December 2019 an independent investigation by
Deloitte into inventory overstatement and a further statement was
announced on 22 January 2020 confirming the extent of the
overstatement. Further details can be found in the Chair's
Statement on page 4 and within Note 1(y) to the Financial
Statements on pages 131 to 133 in the Group's annual report and
accounts.
Borrowing facilities
The Group's net debt balance at 25 January 2020 was GBP127.1m
(2019: net debt GBP123.8m). In September 2019, the Group refinanced
its borrowing facilities. The existing revolving credit facility of
GBP135m and the term loan of GBP47m were refinanced into a new
three-year revolving credit facility of GBP180m (Facility A), with
a lending bank syndicate of four banks. The facility contains
quarterly covenant testing for the Group's leverage ratio, fixed
cover charge and a net assets test. On 23 March 2020, the Group
announced that its lending bank syndicate agreed to increase the
headroom under the Group's revolving credit facilities by a further
GBP13.5m until 18 December 2020 (Facility B). On 20 May 2020, the
lending bank syndicate agreed to increase the headroom under
Facility B by a further GBP11.5m, taking the total Facility B
facility to GBP25m, with a revised Facility B expiry date of 18
January 2022.
The additional facility announced on 23 March 2020 was made
available in conjunction with the exchange of contracts for the
sale of Big Lobster Limited, a wholly owned Group subsidiary, which
owns the Group's Head Office in London. In connection with the
sale, the Group has entered into a short-term lease of the property
for a period following completion from 1 June 2020 to 31 March
2023. The consideration from the sale will be GBP78.75m (subject to
completion of a customary completion accounts adjustment mechanism)
and will be paid in cash by the buyer on completion, expected to
take place in June 2020 following shareholder approval. The net
proceeds of the sale of at least GBP72m, after fees and taxes, will
be applied to repay existing indebtedness under Facility A to
significantly de-lever the Group.
Treasury risk management
The most significant exposure to foreign exchange fluctuation
relates to purchases made in foreign currencies, principally the US
Dollar and the Euro.
A proportion of the Group's purchases are hedged in accordance
with the Group's risk management policy, which allows for foreign
currency to be hedged for up to twenty-four months in advance. The
balance of purchases is hedged naturally as the business operates
internationally and income is generated in the local currencies.
The Group is also exposed to movements in foreign exchange rates on
intercompany balances denominated in a foreign currency. These are
not hedged. In April 2020, the Group exited its foreign exchange
contracts to crystallise a cash gain of GBP6.9m, and as a result,
the Group's foreign exchange risk is unhedged for FY21.
The Group is exposed to movements in UK interest rates as the
revolving credit facility accrues interest based on floating LIBOR
plus a margin. Prior to the refinancing in September 2019, the
Group partially mitigated interest rate risk by entering into
interest rate swap agreements, fixing a proportion of the floating
rate net debt. However post-refinancing, it has not taken out any
new interest rate risk hedges.
Notes:
(1) Constant currency variances are calculated by applying the
exchange rates for the 52 weeks ended 26 January 2019 to financial
results in overseas subsidiaries for the 52 weeks ended 25 January
2020 to remove the impact of exchange rate fluctuations.
(2) For information about non-underlying items and IFRS 16
please refer to Note 1to the Financial Statements.
(3) Profit before tax and non-underlying items and IFRS 16 is an
adjusted performance, adjusted for non-underlying items and IFRS
16.
(4) Underlying earnings per share is an alternative performance
measure, adjusted for non-underlying items and IFRS 16.
(5) Revenue includes licence income, which in 2019 was shown
below gross profit. The 2019 comparative has been restated
accordingly.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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