The Motley Fool

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

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.

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.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

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.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.