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Ted Baker Pays the Price for Its #MeToo Moment

Ted Baker Pays the Price for Its #MeToo Moment

(Bloomberg Opinion) -- A successful British retailer has become an unintended consequence of the #MeToo movement.

Ted Baker Plc, one of the U.K.’s best performing store chains, issued its second profit warning in four months on Tuesday. It forecast underlying pre-tax profit in the year to Jan. 25, 2020 of 50 million ($63.6 million) to 60 million pounds, compared with previous estimates of about 72 million pounds.

The shares had their worst day on record, at one point falling as much as 30.2%. 

Ted Baker Pays the Price for Its #MeToo Moment

The pair of warnings are in stark contrast to the company’s previous pattern of consistently strong performance.

This is partly the fallout from the departure of Ray Kelvin as chief executive officer March. He resigned amid allegations of inappropriate behavior in an affair that has been dubbed “hug-gate” because of his habit of embracing staff. But a tough retail environment is also a factor.

British shops are suffering from a toxic combination of extremely difficult comparisons with a year ago, when the heatwave, Royal Wedding and World Cup boosted sales, and pressure on spending from continued Brexit uncertainty.

Last week, the British Retail Consortium and KPMG said retail sales fell the most on record in May, adjusted for Easter. This has hit home for Quiz Plc. The British fashion chain, which had already issued a series of profit warnings, reported a collapse in earnings on Tuesday, and suspended its dividend.

The U.S. is also important to Ted Baker, and things are not much better there. Poor weather has hurt first quarter sales and forced stores to increase promotions to clear stock.

This leaves the chain in a particularly difficult position. While it battles to keep its image from getting tarnished by hug-gate, its offering needs work. The clothes are expensive, but not that different to what can be found in any other mid-market retailer or even discount chains such as Associated British Foods Plc’s Primark.

The company is also suffering from fashion missteps – its most recent collection didn’t chime with its shoppers.

Lindsay Page, Kelvin’s successor, used to be his right-hand man and ran the business. Kelvin oversaw the brand vision, and under his watch Ted Baker was able to make its products just special enough to stay one step ahead of high street rivals. He also took the group beyond the U.K., and into areas such as home furnishing and male grooming.  Even though Ted Baker’s current collection would have been designed under Kelvin, it is hard to escape the conclusion that the company is missing his creative input.

Given the product failures, and Kelvin’s absence, Ted Baker needs to bolster its design team. It is working on this now, and could announce progress with its interim results in October.

But this may not be enough for a recovery. If it continues to languish, it might appeal to a private equity group or a manufacturer looking to add well-known brand names.

Kelvin still has a 35 percent stake in the company, which is a potential block on any deal. He was also the brand’s DNA. So there’s a question mark over what exactly an acquirer would be buying.

It’s difficult to know how much of Ted Baker’s problems are due to hug-gate and its fallout, and how much to the broader consumer environment.

What is clear is that the company needs to show that it can continue its winning formula, even without the man who has been its driving force for the past 30 years. 

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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