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Who Can Bring Back the Ted Baker Magic?

Andrea Felsted
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Who Can Bring Back the Ted Baker Magic?

(Bloomberg Opinion) -- Ted Baker Plc’s website cheerily invites customers of the quintessentially British fashion brand to “Dance into December” with an outfit for every occasion.

That’s a stark contrast to the drumbeat of bad news pounding in investors’ ears. The shares fell as much as 36% on Tuesday after yet another profit warning and the resignation of the company’s chairman and chief executive officer. The company had already lowered expectations three times this year. Now it says pre-tax profit will be between 5 million pounds ($6.6 million) and 10 million pounds, far below previous expectations of between 25 million pounds and 30 million pounds. It also suspended the dividend.

What was for many years one of Britain’s best performing clothing retailers has been plunged into crisis after its founder Ray Kelvin — who dreamed up Ted Baker and his quirky, classy fashion sensibility — resigned in March after allegations of inappropriate behavior toward female employees such as unwanted hugs.

The departure of Chairman David Bernstein, with immediate effect, is not a surprise. He had been due to go in a year’s time anyway, and a search for his replacement is already underway. The resignation of CEO Lindsay Page shouldn’t be too much of a shock either. He was Kelvin’s right hand man and helped him build the business. The wisdom of keeping a figure who was so close to the founder in the top job was always questionable. His departure could allow a new management team to start with a fresh sheet to reinvigorate the brand and get Ted Baker’s house in order.

 

With Kelvin at the helm, things were always done his way. Rachel Osborne, who recently joined as finance director from Debenhams Plc, steps into the breach as acting CEO until a permanent replacement can be found. She will no doubt work to bring more discipline to the group’s processes after the company discovered the overstatement of unsold goods. She will also have to prevent its balance sheet becoming stretched by the current crisis. A sale and leaseback of its head office, which could be worth about 60 million pounds, is one possibility.

Still the group needs an executive with product and operational experience, capable of bringing back the Ted Baker magic. The brand, which operates in the premium segment of the market, is starting to look tired. That may explain why it has been hurt so badly by the current difficult trading conditions.

There is one possible outcome, however improbable it may sound given the current difficulties. Kelvin may be tempted to buy back the brand he built. He still owns a 35% stake, and while its value has shrunk along with the group’s share price, so has the price he would have to pay to buy the rest. Ted Baker’s market capitalization is currently about 150 million pounds, compared with 1.4 billion pounds in March 2018. Assuming a 500 pence per share offer price, he would have to find about 150 million pounds.

What’s more, although Page will continue to assist Ted Baker with a number of initiatives, under a 12-month contract, he should then be free to work with Kelvin on a bid if he chose to pursue one. This would reassemble the team that turned Ted Baker into one of Britain’s most successful retailers.

The company has endured a dramatic fall from grace. But if Kelvin were to step into the fray, investors could soon be dancing to a different tune.

To contact the author of this story: Andrea Felsted at afelsted@bloomberg.net

To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@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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