A done deal

The accepted bid means that Ted Baker shareholders will receive 110p per share. This is why the share price has jumped pretty much to this level. I don’t see any rational reason for the share price to jump beyond this price. Therefore, there’s no benefit that I can get from buying now. I’ve missed that move.

The business has been looking for a buyer since April, which led to the share price being very volatile as rumours and speculation was rife. Over the past year, the share price is down 37.5%. So although the price has jumped significantly today, the offer price is well below the highs from the past year of 174p.

Ultimately, this deal should ensure the survival of the brand, albeit not as a listed stock on the LSE. The struggles for the retailer since the start of the pandemic aren’t unique. Many others in the sector have underperformed due to the impact of Covid-19.

My thoughts following the Ted Baker share price jump

This does get me thinking. Many peers are trading at very cheap levels. If large businesses are finding the valuations attractive enough to buy, then surely it could be a smart move for me to invest as well.

Then if the market recovers in coming years, the share price gain could be high. Along the way, I might even get a generous payout if I stock I own gets bought out. However, I’m not going to explicitly buy a stock on the hope it gets taken over, as this is pure speculation.

One example that I like at the moment is Superdry (LSE:SDRY). It’s another retail fashion brand that has struggled in recent years. Evidence of this can be seen from the share price, which is down 64% over the past year.

After posting revenue of £872m in 2018, the business has struggled, with 2022 revenue coming in just above £600m. However, the latest results did highlight that store revenue is recovering from the impact of the pandemic. It rose 59.7% year over year.

Based on the Ted Baker move, I think I’m going to pick up a small amount of Superdry shares at the moment. I accept that this is a risky move, as the post-pandemic bump might just be a short-lived phase. But if not, then I’ll be kicking myself in a few years if the share price rebounds from current lows and it becomes a hot growth stock. Further, there is the side benefit if the company gets bought out.

The post The Ted Baker share price jumps 17% on takeover news! What’s next? appeared first on The Motley Fool UK.

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.

The post What’s happening with the Ted Baker share price? appeared first on The Motley Fool UK.

Quite a few UK companies have received takeover bids recently, but I think there are still some bargains out there. Today, I want to take a closer look at the Ted Baker situation and reveal another UK stock I think could be targeted by cash-rich private equity funds.

Ted Baker shares: too late to buy?

The Ted Baker share price is up by 20% at 118p, as I write. But the stock was trading above this level a year ago.

Since then, the business has continued to recover from the impact of the pandemic. Sales during the 12 weeks to 29 January were 35% higher than a year ago, although they’re still below 2019 levels.

It’s too soon to be sure whether Ted Baker’s turnaround will succeed, but broker forecasts today are pricing the shares on 19 times forecast earnings for the 2022/23 financial year.

Is it too late to buy? Three large shareholders control more than 50% of Ted Baker share, including founder Ray Kelvin. For a bid to succeed, I think Sycamore would have to make an offer significantly above the current share price of 118p.

If I bought TED shares today, I might still profit from a takeover bid. I’m not going to do this though, because there’s no guarantee an offer will be made. If Sycamore loses interest, I think Ted Baker’s share price would probably fall again.

A cheap UK stock

Private equity funds like to buy businesses that generate plenty of cash. One company that’s on my radar at the moment for its strong cash generation and low valuation is electrical retailer Currys (LSE: CURY).

In addition to the well-known UK business, Currys also has market-leading retail brands in Scandinavia and Greece. The company’s turnaround under Alex Baldock has seen profits start to recover and cash flow improve significantly.

With the Currys share price currently under 90p, this FTSE 250 stock trades on just 8.5 times forecast earnings, with a 4% dividend yield. Although profit margins are quite low, this seems attractive for my portfolio, especially as Currys generates plenty of cash.

Indeed, Baldock says that by 2023/24, Currys should be generating £250m a year of sustainable free cash flow. Currys’ current market-cap is just £1bn, which means that the shares are potentially trading on just four times forecast free cash flow. That would be exceptionally cheap, in my experience.

We don’t yet know if Baldock can hit this ambitious target. One risk is that Currys will always be forced to compete on price against lower-cost online operators, including Amazon.

However, I’m encouraged by the group’s recent performance. I think Currys is big enough to continue doing well.

Takeovers are completely unpredictable, so I would never buy a stock purely because I thought it might receive a bid. But I could certainly see a private equity buyer taking an interest in Currys.

The post As the Ted Baker share price soars on M&A news, is this UK stock next? appeared first on The Motley Fool UK.

Ted Baker’s sales grow

Still, it is worth figuring out whether the UK stock can finally find a firm footing now. As far as positives go, the company’s sales rose by a healthy 35% during the quarter, compared to the same time last year. It also reported an improvement in trading margins over the the year, which I think might just be the highlight of the report. Also, it was net cash positive at the end of 2021. 

The company is also showing encouraging on-the-ground trends. Products like bags, footwear, and tops from its new collections are reported to have shown strong sales. It is expanding in the UK as well, expecting to open three new stores each year for the next three years. The company has extended its home and bedding product license to North America. 

What’s the downside to the UK stock?

This could be a positive for the stock going forward, however, I think it is important to look at the downside as well. The Ted Baker share price is still a little below where it was at the same time last year. And it is also still way below its pre-pandemic levels. This was probably to be expected considering that for the last two years, the company has reported both declining revenues and has been loss-making too. Considering that its financial year runs from February to January, its 2020 losses cannot be explained by the coronavirus, which turned into a full-fledged pandemic only by March. In other words, the company’s troubles are more fundamental than that. 

Encouraging signs for the Ted Baker share price

It is encouraging to see that it is now in better financial health. As a consumer, I actually quite like Ted Baker products, and see potential from it purely from that perspective. But it is hard to look away from the fact that it has been struggling in recent years. Still, I think there is room for optimism here. Economic recovery is a good time for cyclical stocks like fashion brands. And considering its premium positioning, like in the case of the FTSE 100 retailer Burberry, consumers are less likely to be concerned with small changes in price.  

What I’d do

So would I buy it? If I were feeling speculative, I would make a small investment in it because if it does manage to pull itself together, the stock could reap me some big gains. At the same time, if I only wanted to exercise caution, I would much rather go for safer stocks like its FTSE 100 peer, Burberry. 

The post Why is the Ted Baker share price up 10% today? appeared first on The Motley Fool UK.

Let’s take a look to see if I should add the stock to my portfolio.

A turnaround FTSE stock

The stock in question is fashion designer Ted Baker (LSE: TED). It’s been a terrible investment over the past five years as the share price has crashed from over 3,200p to 86p today. That’s a 97%+ fall!

But City analysts must be expecting a turnaround. The consensus share price forecast is 233p, which would be a huge 171% return from here.

With any turnaround, it’s important to find out what went wrong first. Then to understand if the situation has improved.

Back in 2018, Ted Baker warned that trading was becoming “challenging” across its global markets. Unfortunately for the company, trading continued to underperform expectations in the following years. CEO and founder Ray Kelvin also resigned in 2019 due to allegations of misconduct amidst the company’s poor trading. It also overstated the value of its inventory held on its balance sheet. This is always a huge warning sign as a potential investor, because if I can’t trust the numbers on the financial statements, I can’t value the company accurately.

Ted Baker has had a full refresh of its leadership team since these issues though. A new CEO and CFO have taken charge, with new board members too. The management team also released a strategic update showing how they aim to tackle the issues at the company. This included things like cost reviews, and focusing on e-commerce growth.

There was a clear mismanagement issue at Ted Baker in recent years. As such, I’m more optimistic about the company’s prospects today now there’s new team in charge. The strategic update also looked sensible to my mind.

Could I double my money?

I need to review the most recent results before making an investment decision. Ted Baker released its interim results for the period ended 14 August 2021 at the end of last year. There were some positives to take from them.

For one, revenue grew almost 18% over the same period in 2020. This is a good sign, and shows the turnaround could well be under way. The CEO also said there were “encouraging early reactions to the new collection”. There’s clearly still demand for the Ted Baker brand and this could be improving.

It wasn’t all good though. The company remains heavily loss-making. Also, the cash balance fell by an alarming £48m over the 12 months up to the period the results covered. However, Ted Baker did say this was so it had plenty of stock for the crucial Black Friday and Christmas period.

I can see why analysts are forecasting a more than doubling of the share price. Things look to be improving, and I’m more confident now that a new team is in place.

But I still see some risks ahead and I’m aware that such forecasts can often fall flat. I’m going to see how the company performed over the key festive period first, particularly due to the recent cash spend on new inventory. So, I’m keeping this FTSE stock on my watchlist for now.

The post I’d double my money with this FTSE stock, according to City analysts appeared first on The Motley Fool UK.

Ted Baker shares plummet

Originally launched as a shirt specialist in Glasgow, Scotland, Ted Baker is one of the fastest growing lifestyle brands in the UK. Its collections include menswear, womenswear, accessories, fragrance, footwear, eye wear, and watches. It has a number of stores in the UK, US, and Asia.

As I write, shares in Ted Baker are trading for 109p per share. A year ago shares were trading for 141p, which is a 22% decrease over 12 months. In the past six months, the share price has dropped by 48%, from 212p to current levels. So what’s been happening and is there a recovery opportunity here?

Pandemic hangover?

Ted Baker’s full-year results announcement in June is when the share price drop started. Revenues fell close to 45% in the 12 months to January. As a result, it reported a pre-tax loss of £59.2m compared to the £4.8m profit back in 2020. Sales dropped substantially, highlighting its dependency on its retail network — a retail network that suffered many closures throughout 2020 and some of 2021. 

Trading updates since have been a bit better. A Q2 update in September reported that group sales were up 50% compared to the same period last year. I believe this was a result of reopening and restrictions being eased.

Ted Baker’s half-year results released earlier this month were a mixed bag in my opinion. Sales were up 23% to £433m compared to the same period last year. Revenue was up 17.6% but this was still short of pre-pandemic levels. Losses reduced and net cash was also up offering Ted Baker a stable balance sheet to cope with any financial headwinds ahead.

I found there to be more negatives than positives from these three updates from Ted Baker. I believe the share price dropping is a sign of this. Unfortunately, there could be further issues ahead which could hinder any recovery. 

Risks ahead

There are several macroeconomic pressures that could pose problems for Ted Baker, as well as the new Covid-19 variant it may need to contend with. Rising inflation and costs could hamper margins and profitability. Furthermore, the current supply chain crisis could affect operations too. Finally, if new restrictions come into force, retail outlets could be forced to close. The previous results show Ted Baker’s heavy reliance on sales from its retail locations in my opinion.

Overall I would avoid Ted Baker shares currently. I believe it faces too many challenges ahead and is still suffering from a pandemic hangover as shown by its recent results. There are better stocks out there that offer good levels of safety and better returns in my opinion.

The post The Ted Baker share price is down close to 50% in 6 months. Here’s what I’m doing now appeared first on The Motley Fool UK.

A string of disasters has impacted the company since the end of 2016. The pandemic was just the latest unfortunate event to hit the group.

Revenues for the 2021 financial year were down around 50% compared to 2019 levels. Meanwhile, group net income slumped from £47m to a loss of £87m. 

Still, it looks as if the business is heading in the right direction. According to its latest trading update, which covered the 16 weeks to 14 August, sales increased 50% compared to pandemic levels. The overall trading margin improved by 5% due to higher full-price sales. The company has moved away from discounting to drive profit growth.

Ted Baker share price catalyst 

Management is expecting this trend to continue into the second half of its 2022 financial year. A new e-commerce platform, which has been delayed, will be launched at the beginning of 2022, after the critical Christmas sales period, and its new collections for Autumn/Winter offer have been “positively received“.

These developments show that the business is moving in the right direction. Nevertheless, it has its work cut out to return to growth over the next few years. One of the main reasons why Ted Baker started to struggle in the first place was the company’s lack of financial flexibility.

In the fast-moving fashion sector, where one season can make or break a company’s performance for the year, businesses need strong balance sheets to weather potential periods of underperformance.

Ted Baker lacked this vital quality. Therefore, when the group’s profit margin started to deteriorate in the years before the pandemic, its financial position became increasingly weak. When the pandemic arrived, the organisation was poorly placed to navigate the hostile environment. 

Back from the brink

After slashing costs and raising money from investors, the group has come back from the brink. Still, I think it is challenging for me to determine how much the organisation will be worth five years from now. If Ted Baker’s clothes start flying off the shelves and sales grow for the next few years, the stock could be worth multiples of its current value.

However, if the group struggles to regain its mojo, the stock could continue to languish. 

Considering this challenge, I would not buy the stock for my portfolio today. I think there is just too much that can go wrong. After five years of uncertainty, it is not easy to establish if Ted Baker can return to growth in the next five years. I would rather own one of the company’s peers. Other firms in the premium and luxury fashion retail  sector, like Burberry, have stronger balance sheets and greater financial clout. This will help them fight for market share in the incredibly competitive fashion market. 

The post What could the Ted Baker share price be in 5 years? appeared first on The Motley Fool UK.

However, although many of the company’s shops were open during the period, management said footfall remains 45% below the equivalent period in 2019. The company said this is due to shoppers’ preference for retail parks and regional locations — areas where Ted Baker has fewer stores.

City centre stores are expected to recover gradually, as workers return to offices and international tourism recovers.

Ted Baker’s fashion revamp

Turnaround boss Rachel Osborne says that efforts to rebuild the group’s premium branding are succeeding. Discounting has been reduced, resulting in a 5% increase in trading profit margins. The company said that it ended the second quarter without excess stock.

Ted Baker’s new Autumn/Winter 2022 collection has been “positively received”, with encouraging early sales. A new “product pyramid structure” is said to be working well.

One area that has fallen behind schedule is the launch of the retailer’s new e-commerce platform. The company said that “some technical aspects” are taking longer than expected to resolve. With the Christmas peak trading season approaching, management does not want to take chances. The launch of the new platform has now been delayed until “early 2022”.

This change isn’t expected to have any impact on e-commerce sales, which accounted for 39% of total retail sales during the latest quarter.

Overall trading is said to be in line with expectations so far this year. The group said that it has £106m of available liquidity, providing comfortable headroom against peak cash requirements in September/October.

Ted Baker will publish half-year results on 11 November 2021.

The post Ted Baker reports 50% sales growth appeared first on The Motley Fool UK.

Ted Baker’s share price has fallen by a fifth over the past month. This comes as fears that the lifting of Covid-19 restrictions could be delayed in the company’s core UK marketplace have grown. The small cap sources around 60% of revenues from its home territory.

Still, the Ted Baker share price is up 25% higher on a 12-month basis. Should I buy this UK retail share following today’s dip?

Ted Baker’s losses widen

In full-year financials, Ted Baker announced that revenues tanked 44.2% in the 12 months to January, to £352m. As a consequence, the fashion giant swung to an underlying pre-tax loss of £59.2m. It had punched a £4.8m profit back in financial 2020.

On a statutory basis losses before tax ballooned to £107.7m from £77.6m a year earlier.

Ted Baker’s sharp sales reversal reflects its high dependence upon a large store network. Naturally footfall across its bricks-and-mortar assets suffered considerably during the 12 months as Covid-19 lockdowns came into effect. This caused total sales across its retail division (stores, concessions, and online) to drop 42.2% year-on-year in financial 2021, to £254.3m. Revenues generated through e-commerce rose 22% to £144.9m.

Meanwhile turnover across Ted Baker’s wholesale and licensing arms tumbled 50.9% and 34.5% respectively in financial 2021. These clocked in at £85.3m and £12.4m.

Tough trading continues

News that the retailer continues to suffer extreme revenues stress hasn’t helped the Ted Baker share price on Monday, either. Coronavirus restrictions in the UK, mainland Europe, and Canada have all taken a fresh bite out of the retailer’s revenues in recent months.

Sales were down a further 19.9% during the three months to April, the company said. At the retail division, store sales and online sales were down 40.7% and up 4.5% respectively. Meanwhile wholesale and licensing revenues were 22.4% lower.

Time to buy Ted Baker?

I’m not surprised that Ted Baker’s share price is slumping again following these fresh financials. Personally speaking, it’s not just the threat posed by the ongoing Covid-19 crisis which is making me avoid the UK retail share. I’m also discouraged by the company’s timid e-commerce proposition.

As analyst Sophie Lund-Yates of Hargreaves Lansdown notes: “digital momentum looks to be dissipating” as lockdowns unravel. She adds that “Ted Baker needs to find a way to sustainably improve its online business, or it won’t bode well for trading patterns in the post-pandemic, digital-centric world”.

There’s no doubt that Ted Baker still has great brand power. And this could help sales recover strongly during the economic upturn and consequent improvement in consumer spending. But the business also faces severe competitive pressures that could derail any comeback. I’d much rather buy other UK shares for my investment portfolio today.

The post Ted Baker’s share price slumps after FY results! Should I buy this UK share? appeared first on The Motley Fool UK.

Here are two companies in the FTSE All-Share I would buy with an investment of £5k, based on their valuation and growth prospects. 

Undervalued UK shares

The first company I would buy is Hostelworld Group (LSE: HSW). This is a global, hostel-focused online booking platform. Its target market is passionate travellers who “crave cultural connection and unique experiences“. 

It may be the case that this section of the travel market comes back faster because its consumers are more travel-focused. As a result, they may be more willing to travel, despite the risks, considering their desire for “discovery and adventure“.

Of course, this may not be the case. The group may struggle to recover if its customers are put off by sharing rooms, which is common in hostel accommodation. There are also signs that holidaymakers are using lockdown savings to book more expensive trips. This could have an impact on the hostel business. 

Still, according to the company, domestic booking volumes have been recovering over the past few months, particularly in the North and Central American markets. I believe this trend should accelerate over the next few months as the global economy continues to open up. 

In the meantime, Hostelworld has plenty of funding to see it through. The monthly operating cash outflow is €1.6m, which is easily covered by €38.3m of cash on its balance sheet. 

That’s why I would buy this company as part of a basket of undervalued UK shares right now. 

Recovery play

The other company I would buy with my investment of £5,000 for a basket of UK recovery shares is Ted Baker (LSE: TED). Once again, this is a relatively high-risk investment. The fashion business had problems before the pandemic. And it entered 2020 in a relatively weak position. 

In June 2020, the company launched a three-year strategic transformation programme. It could be some time before this plan starts to yield concrete results, but green shoots are already emerging. 

The company has managed to reduce rent costs by around £7m in its current financial year. As a result, annualised cost savings across its business could be as much as £31m, according to its interim results announcement released at the beginning of December.

At the same time, e-commerce sales jumped nearly 42% in the 28 weeks to 8 August 2020. Although overall revenues declined 46%, the growth in e-commerce supports the company’s ambitions to become a more digital business.

These positive developments aside, the company remains in a challenging position. It reported an underlying loss of £39m in its fiscal first half. Moreover, as the pandemic has kept physical stores closed for most of 2021, it seems likely the enterprise will report a rough second half as well. 

As such, I think Ted Baker faces an uphill struggle to return to growth. However, considering the stock’s depressed price, I would buy it as a recovery investment. 

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