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Forget Ted Baker! I’d buy this FTSE 250 stock instead

As fashion retailer Ted Baker (LSE: TED) has halved in value in the last year, I look to another high-street brand continuing to succeed, whilst trading conditions go downhill.

In recent years Ted Baker had climbed in popularity, a premium label producing high-quality, stylish children’s wear and popular occasion wear. I loved its children’s party clothes, snow suits and jackets.

However, this year Ted Baker reported its first drop in annual profits since 2008. The company has been hit by “very unusual” weather patterns across North America, heavy discounting in a “highly promotional” sales environment and a difficult consumer environment in some of its markets.

The rumour mill is rife with disappointment in recent style offerings and the company admitted to “challenges” with its spring/summer collections. The brand shies away from expensive marketing campaigns, leaving the product to speak for itself. This is all very well when the clothes are on point, but a disaster waiting to happen if they do not meet customer desires.

Ted’s occasion wear has brought success in the past, but its price point is likely higher than most shoppers are willing to spend.

NEXT please

As far back as I can remember, NEXT (LSE: NXT) has had a dedicated and loyal customer base, who return year after year and can’t see past it when stocking up their family wardrobes.

Political and economic uncertainty continues to stress the British high street, with many well-known brands having disappeared in the past few years.

Nevertheless, the NEXT share price has steadily risen over the past six months.

Although it pays to be cautious, particularly in this precarious sector, NEXT does have some good points going for it. Vitally, it has a lot of surplus cash, which it plans to return to shareholders via share buybacks. This should in turn help boost full-year earnings per share.

NEXT has proved adaptable with a solid and successful online presence, sales of which now account for half its business. June broker forecasts upgraded from neutral to buy, shares are on a price/earnings ratio of 10.97, with a dividend yield of 3.45%.

Ethics and Slavery

NEXT seem to be pretty good at keeping up with societal trends as well as fashion trends. It recently collaborated on an ethical trade app to educate employees about responsible labour sourcing in the fight against modern slavery. It is committed to ethical trading through various avenues including its 2025 Responsible Sourcing Strategy.

The company has agreed to setup an Amazon Counter service throughout its stores, which enables shoppers to collect their Amazon orders within their local NEXT store. This may seem counter-intuitive, but it encourages footfall on the retail floor, enticing these customers to spend while they collect.

In a sector that is under considerable strain, NEXT continues to stand head and shoulders above the rest, as dependable and cash rich.

Hopefully Ted Baker will iron out its problems and the share price recover with time; however, I would avoid Ted while its future is so uncertain.

Pressures are obviously affecting the sector, so it is certainly pertinent to diversify your stock portfolio, but surely not every retailer will fail, and I look favourably towards NEXT, as it continues to hold onto a steady share price and has an impressive cash reserve in the bank.

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Kirsteen owns no shares in any company mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended 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.