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Can outside help be good news for the Ted Baker share price?

After seeing a high of more than £20 per share last year, it has been a tough 12 months for fashion retailer Ted Baker (LSE: TED), with profit warning after profit warning leaving its shares at a mere £4 as I write this. Combined with the controversial resignation of CEO Ray Kelvin amid allegations of inappropriate behaviour towards staff, it is perhaps no wonder then that the company feels the need to do something dramatic.

So comes the announcement last week that Ted Baker will be bringing in outside consultancy firm AlixPartners to conduct a full-scale review of its operations. According to the company the consultants will have a broad mandate to create a turnaround strategy, with no area of the business seemingly off limits.

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Big words require big action

The news should certainly offer investors some hope – all too often companies can be entrenched in their ways and refuse to even attempt the changes needed to bring about the kind of improvement Ted Baker obviously needs. However this comes with a caveat. The real force of this consultation, and future impact on Ted’s share price, really depends on two things.

Firstly, it requires AlixPartners to find a solution that will benefit not just the company, but investors and shareholders as well (the two are not always fully aligned – consider for example a recommendation to move into private equity or to accept a low-ball takeover bid).

Secondly, and just as important, will be for Ted Baker management to actually implement the changes and strategy that the consultancy firm recommends. Either through a reluctance to change entrenched beliefs and systems, or a more practical inability to makes the changes quickly, this is also often not as likely as one would imagine.

Many has been the firm who brings in an outside consultancy to imporve things, only to find out that they are unwilling or unable to make the changes necessary when it comes down to it. Though it seems like Ted Baker has shown a clear intention to make real changes here, it is never truly certain until we see what they make of the recommendations.

Can they help?

Falling profits have been the key driver behind the company’s share price pressure – with three different profit warnings being brought about by three different causes.

In February the company had a £5m write-down due to “IT and warehouse transition and currency movements”. In June, it warned that increased discounting and a “less convincing product offering” had caused sales and margins to slide. With its half-year results in October, it again cited the large discounting but also highlighted the unrest in Hong Kong as being behind its troubles.

On the one hand this collection of issues could be a warning sign – neither a lot of excuses or a lot of real problems are good news. However it does perhaps offer some hope for the consultancy firm – there is seemingly much room for improvement, and presumably a wide range of areas the company could improve to help its bottom line.

I think it is still early days to buy into Ted Baker just yet, but I would be very curious to hear what AlixPartners has to say after their review.

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Karl has no position in any of the shares mentioned. 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.