Ted Baker bosses resign on warning pretax profit may crash 90%
Geneva — Ted Baker’s top management resigned on Tuesday and the UK fashion chain suspended its dividend, triggering a plunge in the shares to the lowest since 2003.
The power vacuum leaves Ted Baker floundering as it tries to contain the fallout from allegations of inappropriate office behaviour by its founder, Ray Kelvin, and the overstatement of unsold goods. The shares fell as much as 36% as the retailer also forecast a drop in pretax profit of as much as 90%.
Chair David Bernstein and interim CEO Lindsay Page resigned, and recently appointed CFO Rachel Osborne becomes acting CEO with immediate effect.
Ted Baker is “rudderless at a time when the business badly needs a steady hand,” wrote Michael Hewson, an analyst at CMC Markets. The new CEO “probably feels she’s just stepped into the middle of a hurricane”.
The latest warning shows that the retailer has yet to stem the crisis as consumers who once snapped up its stylish, quirky looks turn elsewhere. Kelvin abandoned the CEO position in March after allegations he gave employees unwanted hugs and asked female staff members to sit on his knee.
Osborne, 54, joined in September after serving as CFO at department-store operator Debenhams. She is a chartered accountant with a strong background in retail, having worked at companies including Domino’s Pizza Group, John Lewis and Kingfisher.
Independent board member Sharon Baylay will be acting chair until a replacement is found.
‘Steady the ship’
“There’s a lot to do to steady the ship,” wrote Andy Blain, an analyst at Panmure Gordon, who withdrew his hold recommendation on the stock. Blain said that rating had been based purely on the potential for the company to be taken private.
Talk of a buyout by Kelvin has been fuelled by the 77% plunge in the share price over the past 12 months, which has cut the company’s market value to £153m. The founder still holds a roughly 35% stake, according to data compiled by Bloomberg.
“The current management uncertainty and weak operating performance leaves the business at risk of takeover,” Peel Hunt analyst John Stevenson said.
Ted Baker said it hired Alix Partners as consultants to look into cost cuts. The company also began a review of its assets in October and has hired Deloitte accountants and law firm Freshfields Bruckhaus Deringer to investigate the overstatement of inventories.
Outgoing CEO Page became Ted Baker’s CFO in 1997 and chief operating officer in 2014. He stepped into the top role after a probe into Kelvin’s conduct found “areas for improvement” in the company’s personnel policies and procedures. The company previously dismantled a “hug zone” near Kelvin’s desk after the allegations emerged in 2018.
Sales in the 17 weeks through December 7 fell 3.9% on an adjusted basis, and the company said its gross margins are below expectations on increased discounting. Ted Baker said pretax profit may decline to as little as £5m in 2019
“The last 12 months has undoubtedly been the most challenging in our history,” the company said.