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Feb 23, 2022
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Ted Baker hails recovery progress, despite Omicron blip

Feb 23, 2022

There was upbeat news from Ted Baker on Wednesday as the fashion retailer reported its fourth quarter results, saying the 12 weeks to the end of January saw accelerating sales growth and a significant improvement in the full-price mix. The company's shares rose a healthy 7% in early trading after the report was released.

Ted Baker

The improvement came despite ongoing headwinds from the Omicron variant, with group sales growth of around 35% compared to a year earlier and up 18% compared to Q3.

That said, it still has work to do to get back to its pre-pandemic levels as retail sales remained lower on a two-year basis. But they were down only 10% before the Omicron warnings started denting consumer confidence. Once those warnings really hit home, it saw a period in which sales were 42% down on a two-year basis. 

But the group managed to navigate the global global supply chain crisis and said it saw only a modest impact on product availability. Also good news was the fact that the trading margin improved by more than 35 bps across all channels, and in the second half as a whole, the full-price sales mix was up over 800 bps, “re-establishing our premium brand positioning", Ted Baker said.

Diving deeper into the details of the quarter, that approximate 35% group sales increase was actually 35.2% on a comparable basis, and was 28.3% higher on a reported basis (when the latest 12 weeks are compared with the previous year's 13-week period). Compared to two years ago, however, group sales were down 28.6%.

Retail sales on a directly comparable 12-week basis were up 36.5% against last year and down 29.5% against two years ago. That divided into sales through its stores being up 90.4% on a one-year basis and down 43.2% against two years ago. Meanwhile e-commerce was up 2.1% (one year) and down 0.9% (two years). Wholesale revenue was up 27.8% and down 27.9%, against one and two years ago, respectively.

As mentioned, the Omicron variant threw a spanner in the works of what was originally an encouraging quarter, but it's good news that the recovery was clearly under way before Omicron made its presence felt. In fact, at the start of the quarter, several store groups and categories were showing growth compared to the pre-Covid period.

Other negative factors included retail sales growth rates being adversely affected due to a change in the operating model relating to its Japanese and Chinese business moving from retail to license/joint venture, and from House of Fraser moving to wholesale.

But the decision to rein-in aggressive discounting was paying off. While it lowered the rate of sales growth, it delivered better trading margin and the company said it’s building a stronger business for the long term.

It added that several product licence partners have seen strong momentum, eyewear remains “a standout category” and it has been pleased with the initial customer response to newer licensed product from Baird and Next.

Ted Baker said the response to its new collections has been encouraging with AW21 womenswear performing well and strong sales in bags, footwear and tops. Menswear was more mixed, but it said it saw “sales over-indexing on core and continuity product, with strong performance on footwear”.  It’s also taking “key learnings into the SS22 collections”.

Saying that it’s making “good progress” on recruiting a new Chair, “with the search process well under way”, CEO Rachel Osborne added: "We continue to make good progress with our transformation, despite the impact of Omicron on the quarter. The strong improvement in trading margin is encouraging, along with the increase in full-price sales mix, demonstrating the progress we're making as Ted re-establishes its premium brand positioning.

“Our product is resonating with customers and we were particularly pleased with the performance of Womenswear”.

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