Ted Baker (LSE:TED) shares have rallied recently. So what’s happening with the Ted Baker share price and should I add the shares to my holdings or is it too late?
As a quick reminder, Ted Baker is a global lifestyle brand based in the UK. Its collections include menswear, womenswear, accessories, fragrance, footwear, eye wear, and watches. It currently has stores in the UK, US, and Asia.
Ted Baker share price rallies amid takeover talk
Ted Baker has been the subject of takeover interest in recent weeks. I believe this has caused the shares to rally. Here’s a quick timeline of events.
- 18 March 2022 – US-based private equity firm Sycamore expresses interest in buying Ted Baker, causing the Ted Baker share price to rally by 21%. Under UK takeover rules, Sycamore must submit a bid or walk away by 5pm on 15 April.
- 25 March 2022 – Sycamore submits a formal bid to buy Ted Baker with an offer of 130p per share, totalling £250m.
- A few days later, Sycamore sees a second bid of £253.8m rejected.
- 4 April 2022 – Sycamore reveals third approach for Ted Baker although specific figures are not released. Ted Baker board confirms it is willing to sell the business if terms and financials are met. The Ted Baker share price closed up 14% after news of the third offer broke.
- 13 April 2022 – Ted Baker confirms Sycamore will take part in the formal sale process it initiated a week prior after Sycamore’s initial bids.
Current state of play
The Ted Baker share price has been on a downward trajectory for some years. The pandemic did not help. As I write, the shares are trading for 149p. Year to date, the shares are up 44% from 103p to current levels. The shares have rallied 52% from 98p to current levels.
Let’s take a look at Ted Baker’s performance and recent trading. The past couple of years have been tough. The pandemic took its toll and 2021 results were poor and highlighted Ted Baker’s reliance on its store network. Remember this is a store network ravaged by closures due to the pandemic.
It did release a Q4 and pre-close update in March, before the takeover speculation began. Sales growth of 35% compared to Q4 2021, increasing from 18% reported at Q3 is a significant achievement. There are signs of life still.
I believe Ted Baker faces intense competition from the rise in fast fashion. This could dent future performance and investment viability. Furthermore, macroeconomic factors such as rising costs and supply chain issues are sure to impact performance too. I think this will hinder any recovery.
My verdict
My investing mantra has always been long-term buy and hold. For that reason I’m not going to buy shares in an attempt to turn a quick profit in case Ted Baker is sold. I don’t think the shares will go much higher.
I’m not sure what will happen or if the business will be sold but I will keep a keen eye on developments. If the business is not sold, or Sycamore decides not to press ahead, I expect the Ted Baker share price to fall once more. I still wouldn’t buy shares if the business wasn’t sold as I feel Ted Baker’s recovery could be long and arduous.
