Ted Baker results improve and year starts well, but still lots of work to do
Ted Baker’s full-year preliminary results and Q1 update on Thursday showed “good sales momentum, improving gross margin and operating cost leverage” at the up-for-sale fashion retailer.
The figures weren't perfect, but they do show the brand heading in the right direction.
For Q1 FY23 — the 12 weeks to 22 April — group revenues rose 20% year on year, but were down 37% against the pre-pandemic Q1 (FY20), so the company clearly has some way to go to improve its performance.
Progress was marked in the UK and the EU, although it was more challenged in North America and this picture seems to have continued into Q2 so far. It's seen an encouraging start to Q2 with improvements in sales trends in-store and online versus Q1 in the UK and EU markets. But North America retail has been “adversely impacted by availability and e-commerce platform disruption”.
For Q1, it also said retail revenues rose 28% on the year and fell 32% against the pre-Covid year, while sales through stores rose 137% and fell 37% against those periods. E-commerce was down on both measures – by 36% and 20%, respectively. And while wholesale was up 2% on the year, it was down as much as 49% against FY20. However, license revenue rose 40% on the year and fell only 2% against the pre-pandemic Q1.
It made ongoing progress in its full-price sales mix with a rise of 1,500 bps for Q1, although this will still below pre-pandemic levels. The trading margin also improved by 360 bps against last year.
That overall 20% rise in revenues came as consumers returned to offices, attended weddings and travelled, all of which provided positive tailwinds. However, it said it’s "mindful" of the consumer squeeze from inflation and cost of living pressures, so the future remains uncertain.
The company also said the launch of its new digital platform with an improved user experience is delivering a better conversion rate, although anticipated disruption from re-platforming is adversely affecting e-commerce sales during the first half.
But it has had an encouraging response to its SS22 collections with womenswear strength continuing from AW21 and good sales for dresses, bags and footwear. It has also seen an improved performance in menswear for shirting, knitwear and jersey.
Now for those full-year results. The 52 weeks to 29 January (FY22) saw group revenue rising 20.5% to £428.2 million and up 23.2% on a constant currency basis.
It remained loss-making although the underlying loss before tax narrowed to £38.4 million from £59.2 million in the previous year.
Accelerating sales growth came with sequential improvements during the year and group brand sales of £918 million were up 21% compared to FY21.
The year was an unusual one given the multiple lockdowns in its various markets, the cautious reopenings, the Omicron variant, then the full-on consumer recoveries ahead of the extra worries that came after the financial year ended (due to Russia's invasion of the Ukraine, surging inflation and a seemingly-never-ending supply chain crisis).
During the year, retail sales were disrupted but still increased 17.2%, with digital sales delivering 44.3% of the total (against 57.5% a year earlier when lockdowns made even more of an impact).
Overall, digital sales demand stayed above historical levels, up 12.7% on a two-year basis, but “fell below the levels we saw during the first lockdown as we reviewed our promotional approach in line with stock and liquidity levels”. Its e-sales performance has been strong in concessions, with partners like John Lewis and Next “performing well”.
From a product point of view, the pick-up in occasionwear in the latter half of the year, along with formalwear and suits, “was an encouraging sign that people are ready to get back to some normality”.
Ted Baker saw good performance across womenswear accessories and footwear. However, its menswear didn't perform as well as expected, particularly outerwear, “where some of our styling did not resonate as well with our core customers as we had hoped”.
It also said that “where consumer confidence was recovering in the first half of the year, we saw significantly improved sales across our North American concessions and North American and UK shopping malls". This was also reflected in the return of footfall in the first part of Q4. “Although this didn't hit pre-pandemic levels, we did see an uplift, with many more customers coming out and shopping. We saw strong results for the six weeks of trading from the start of November.”
But the Omicron variant and restrictions in early to mid-December saw footfall drop away — first in Europe and then in the UK and US. “With the mood changing with the lifting of restrictions in the UK in late January, and with more optimism about the shift in mindset, we hope to see a similar return to recovery of footfall,” it said.
As for licensing, the company said income increased by 21.7% to £15.2 million, with strong growth in eyewear, as well as another good performance from childrenswear and lingerie in partnership with Next. But formalwear sales “remained subdued”, particularly in H1.
Copyright © 2023 FashionNetwork.com All rights reserved.