What I’d do with Ted Baker after its share price fell 76% in a year

Would I sell and run or would I stick it out?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

At its last close, FTSE 250 luxury brand and retailer Ted Baker (LSE: TED) saw its share price drop by 76% from last year, hit by what looks like a perfect storm. However, it was not all sudden.

TED’s woes have been accumulating for some time and its share price has been falling. When I wrote about it for the first time last year around this time, it was already clear that TED isn’t for the faint-hearted. Six months down the line, it’s amply obvious that there are better-performing companies to consider.

Freefalling financials

But it’s this latest blow that seems to be particularly severe. TED continued to report a fall in revenue and profits, and both its CEO Lindsay Page and executive chair David Bernstein stepped down as well.

With this as background, it follows that the outlook would also be disappointing. And it is. The latest update cautions that it’s “appropriate to take a more cautious outlook for the remainder of the financial year”.

Part of the turn in TED’s fortunes has nothing to do with the company at all, but with larger macroeconomic uncertainties. Among those whose updates I have been poring over, company after company have flagged this as a key issue affecting their business. Yet, there are luxury brands that have managed to effortlessly buck the trend, FTSE 100 company Burberry being one example.

A perfect storm

While TED, like Burberry, has standalone stores, it also has tie-ups with third-party retailers like House of Fraser. With the latter going into administration in 2018, TED had mentioned the hit in its last annual report, even though revenue had grown during the 2019 financial year.

Debenhams has met the same fate, and that too is likely to have impacted performance. Added to this, there was an inventory accounting error earlier this year and the unceremonious departure of its previous CEO, Ray Kelvin, who was also the founder, from his position.

Not all’s lost

The big question now is – what’s next for Ted Baker? First things first, in the short term it’s reasonable to expect that the share price will recover from its current lows. Of course, I don’t think it’s headed to the highs seen last year anytime soon, but there’s often some recovery after a dramatic price drop, like the 13.4% decline we saw from the previous close.

In its update, TED says the last year has been “the most challenging in our history”, and for investors I do believe it needs to be looked at in exactly that context. TED has seen rising revenues over the years and though it reported lower profits in 2019, it was seeing consistently rising profits in the years before that.

If I were an investor in the share, which I’m not, I wouldn’t panic and sell. But I wouldn’t invest in it right now either.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry and Ted Baker. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »