Ted Baker (LSE:TED) has had a dismal year and its share price is continuing to slide. At the time of writing it sits at £3.37, down from a high of £21.20 in January.
Concerns had been circulating in recent months that its stock-to-sales ratio was raising a red flag for investors. It appeared to have a build-up of too much inventory, which is not uncommon in the retail sector. With a higher price point than many of its high street competitors, a weak economy was weighing heavily on the brand.
Last week the company announced the value of its inventory had been overstated by up to £25m, so a law firm and independent accountants have been appointed to investigate.
This bombshell was followed up a few days later with another profit warning and the news that two bosses had resigned. Earlier in the year the company was caught up in a misconduct scandal involving its founder and Ted Baker’s woes have been compounded by the dark cloud hovering over the British high street.
High street hardship
Ted’s clothing ranges are sold through several retailers, most prominently Debenhams, along with House of Fraser and John Lewis.
Its children’s party wear has been a highlight of department store offerings in recent years. But with lower footfall and many of these stores suffering their own series of setbacks, Ted has endured impact from several angles.
Back in August, it announced a partnership with current star retailer Next, beginning in March. This is a give-year deal in which Next will create and sell Ted’s children’s clothing, shoes and accessories, in collaboration with Ted Baker’s creative team. While I think this is a wise move, considering Debenhams difficulties, I do wonder if Next is getting too big for its boots. It now has over 1,000 brands listed on its website, so will Ted’s product lines stand out from the rest or be overlooked?
I think Ted Baker will have a tough road ahead and in such a competitive environment, its product offerings are key to its success. I would forget Ted Baker stock for now.
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Kirsteen 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.