Ted Baker PLC (LON:TED) has said it is continuing to focus on its turnaround strategy after the coronavirus (COVID-19) pandemic amplified the fashion group’s legacy issues and caused interim losses to swell.

In the first four weeks of the fourth quarter, Ted Baker said its sales tumbled by 37%, albeit an improvement from the 40% fall posted in the third quarter to October 31, 2020.

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The fashion designer said its online channel saw a particularly strong performance while its stores were affected by the pandemic lockdown restrictions and footfall shifted towards out-of-town and neighbourhood retail locations.

E-commerce sales, which increased by 22% in the four weeks to November 28, now represent over 44% of the group’s total retail sales, while they were only 25% a year ago.

As of November 28, the retailer had GBP58mln of net cash and GBP133mln of available bank facilities.

Looking ahead, the firm said there is a material risk to profits if the UK government is not successful in securing EU trade deals, resulting in a GBP16mln full-year hit in the worst-case scenario.

The company is ploughing on with its turnaround strategy, implemented before the pandemic hit following a massive financial blunder a year ago caused by management issues.

David Wolffe, who became Ted Baker’s chief financial officer in May, has focused on strengthening the balance sheet by maximising savings, reviewing the store portfolio and its inventory strategy.

In the current financial year, the company said annualised savings are expected to be GBP31mln at a cash cost of GBP3.9mln, while fixed rent savings should be GBP7mln.

In the half-year to August 8, 2020, Ted Baker’s revenue slumped by 46% to GBP169mln while its loss before tax swelled by 276% to GBP86mln. An interim dividend was not declared.

Analysts at Hargreaves Lansdown said the current savings are “clearly” not enough to see it through the economic pain so Ted Baker is hoping to trim costs in rent.

“Headcount is also being reduced further with payroll costs expected to be reduced by another GBP4mln to GBP31mln. By pulling hard on the cost reduction lever, underlying free cash flow is expected to be positive for the year, but turning sales around will be key to its long term recovery,” analyst Susannah Streeter noted.

“The pandemic has come without founder Ray Kelvin steering the fashion ship. He resigned as chief executive last year following allegations of inappropriate behaviour towards staff but he now has representation back on the board, to help oversee the recovery.”

“Management will now need to focus hard on just how to bring the sparkle back to the brand, whilst also dealing with the headwinds of a potential no-deal Brexit scenario, which it has warned could lead to significant supply issues.

–Adds analyst comment–

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