Thread Carefully: Ted Baker to reveal £80m share plan

June 26, 2020

2 min read

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What's going on here?

Ted Baker recently announced a rescue plan combining an open offer to existing shareholders, and a placing, which will offer any outstanding shares to institutional investors. The rescue plan, which is selling shares at a discounted price of 75p a share, hopes to raise approximately £95m, with up to a further £10m available if new shares are also offered to the public in an offer for subscription.

What does this mean?

This measure comes as a further hit to the already-struggling Ted Baker, who is facing one of its worst years. Despite sales rising by 78% since the start of lockdown in March, the company has found itself severely impacted by the crisis. Its sales were down by 34% from January to May, according to the Financial Times. 

Ted Baker’s downfall was kicked off by a sexual harassment scandal involving its founder Ray Kelvin. Despite being replaced by Rachel Osborne, the executive who oversaw Debenhams’ restructuring, Kelvin remains the company’s biggest investor. In the 15 months since the scandal, shares have fallen dramatically. At the start of June, shares were down as much as 89% on prices from this time last year. The firm has reported an £80m loss for last year. This follows a £58m overstatement of its shares caused by an accountancy error.

What's the big picture effect?

In line with most other retailers, the company has begun to gradually re-open its stores across the UK. This does not mean that things will necessarily be looking up for Ted Baker. The requirement of compliance with social distancing rules will likely drive away many potential and loyal clients from retail stores, as complying with social distancing has a large price tag for retailers. Kurt Geiger reports having spent over £5m preparing its stores for reopening. This is likely to further hinder companies financially recovering from the crisis, following a £1.8bn a week loss in sales, according to the British Retail Consortium. 

The condition for retailers seems even worse when the effect of the shift towards online shopping is taken into consideration. In recent years, customer habits have developed to prefer e-commerce. For this reason, Britain’s high street sales in 2019 have seen the longest period of stagnation since records began. With billions worth of clothing piled up in warehouses, companies already facing internal crises, like Ted Baker, have an even lower chance of long term survival.

There is, however, also a positive aspect. As seen in stores across Europe, lower shopper numbers have been relatively mitigated by higher than average transaction values. It remains to be seen whether the re-opening of stores with strict social distancing measures in place will be a justifiable method of raising profits again. A prospective cash call aimed at mitigating the losses of its previous poor performance would allow Ted Baker enough time to solve its internal problems before dealing with the impending economic crisis. 

To read more about the declining state of the retail industry, you can find our article here.

Report written by Andreea Dicu

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