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Hargreaves Lansdown: Deep creases remain in Ted Baker’s business model

Hargreaves Lansdown’s Susannah Streeter discusses the outlook for high street fashion chain Ted Baker. 

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, comments:

“Ted Baker has been trying to iron out some pretty deep creases in its operations and from this disappointing update it seems parts of the business might have to be shoved back into the wash again to start afresh.

What is particularly worrying is that online sales have fallen back at a time when the group most needed to inject its digital operations with a big dose of energy. The company attributes this to fewer discounts during the period, which although is welcome, it still shows that shoppers were lured by offers of a bargain rather than a desire to snap up coveted new styles. Although sales overall have grown 50% since the same period last year, that’s not a huge snap back, given the pandemic tore a hole through its collections, as more formal wear, which the group was known for, went right out of fashion. Due to technical issues the launch of the new online platform has been delayed to early 2022. Although the group claims it will have no material impact on online sales, it’s yet another setback when the group is desperate for all the firepower to get this part of the business moving.

The other big issue for the group is the location of its stores. It’s reliant on many concessions in department stores and stores in high streets, where footfall is still languishing well below pre-pandemic levels. Consumer confidence is returning to shopping malls in the UK and North America which will come as a relief, but footfall continues to be stronger in retail parks out of town where the company has a smaller physical presence. There is tinkering around the edges with the store estate, but the footprint of stores still needs a major shake-up, especially given that sales are around 30% below pre-pandemic levels.

There are some bright spots among the racks of challenges. Customers have so far given the Autumn Winter collection the thumbs up with the pace of early purchases encouraging as weddings and Christmas parties return. But there is so little breathing space, buying teams will have to nail the right look season after season, to bring back the custom the company has been elusively searching for.”

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