Ted Baker, the formal and occasion wear retailer, has reported a slump in annual sales during the coronavirus pandemic but argued it is now better placed to navigate continuing disruption.
The fashion chain reported a deepening pre-tax loss of £107.7m for the year to the end of January on the back of a £77.6m sum in the previous 12 months.
The company was already in the doldrums at that time – before COVID-19 hit – as it pledged a recovery from a string of setbacks including a £58m inventory overstatement and the departure of previous chief executive and founder Ray Kelvin following misconduct allegations – claims he has denied.
Ted Baker said on Monday that the pandemic had taken an inevitable toll on its CEO Rachel Osborne’s transformation plan, which includes a greater focus on online sales.
It revealed an underlying pre-tax loss of £59.2m for its last financial year compared to a £4.8m profit the previous year as its global store footprint fell under coronavirus trading restrictions.
Total revenue fell 44% to £352m though e-commerce sales were up 22% to £144.9m.
The company, like many rivals, had to cut jobs and raise cash during the height of the crisis as it navigated the disruption to normal life which heavily restricted demand for its prime offering.
Competitors with a focus on athleisure and casualwear have tended to do better given more people working from home and the lack of opportunities to enjoy nights out.
Ms Osborne said: “While the impact of COVID-19 is clear in our results and has amplified some of the legacy issues impacting the business, Ted Baker has responded proactively and is in a much stronger place than it was a year ago.
“During the period, we delivered robust cashflow generation, fixed our balance sheet, refreshed our senior leadership team and today we are upgrading our financial targets for the second time since outlining our new strategy last summer.
“Additionally, we have made good progress with our sustainability strategy, Fashioning a Better Future, including the mapping of all of our factory partners within our supply chain and significantly increasing our usage of cotton from sustainable sources to 69%.”
Shares opened positively initially but later fell back by around 1.6%.
Senior analyst at Freetrade, Dan Lane, said the results represented something of an own goal, despite the increase in e-commerce sales.
“Ted’s online presence needs an almighty boost and should have been focused on years ago.
“It finally started to get some attention as part of ‘Ted’s Formula For Growth’ but leaving it so late has meant being ill-prepared for the shift online over the year.
“It’ll be the epitome of ‘too little too late’ for a lot of beleaguered investors.”
Liz Truss admits ‘disruption’ to UK economy but stands by forecast-free mini-budget
Liz Truss has for the first time acknowledged that “there has been disruption” to the UK economy following last week’s mini budget.
Since the chancellor’s announcement of £45bn in tax cuts the value of the pound has plummeted, nearly half of mortgages have been pulled and the Bank of England launched a £65bn bail-out to save pension funds from collapse.
Asked on Friday whether she accepted this is largely a crisis of her government’s own making, the prime minister said: “It was very, very important that we took urgent steps to deal with the costs that families are facing this winter, putting in place the energy price guarantee for which we’ve had to borrow to cover the cost… but also making sure that we are not raising taxes at a time where there are global economic forces caused by the war in Ukraine that we need to deal with.
“I recognise there has been disruption. But it was really, really important that we were able to get help to families as soon as possible – that help is coming this weekend.
“Because this is going to be a difficult winter and I’m determined to do all I can to help families and help the economy at this time.”
The government’s energy price guarantee comes into force on Saturday.
It means the average household shouldn’t have to pay more than £2,500 a year on their energy bills.
Ms Truss defended the decision to present last week’s mini-budget without an accompanying forecast from the Office for Budget Responsibility (OBR) due to the need to respond rapidly to rising energy prices, amid concerns that average annual household bills could soon reach £6,000.
The lack of such a forecast is blamed by many – including Mel Stride MP, the Conservative chair of the treasury select committee – of contributing to the week’s turmoil on the markets.
The OBR said a forecast had been offered to Chancellor Kwasi Kwarteng but was not commissioned.
On Friday morning, the prime minister and chancellor met the OBR’s budget responsibility committee and afterwards issued a statement saying they “made it clear they value its scrutiny”.
But Ms Truss did not accept that failing to commission a forecast last week had been a mistake.
“It was important we acted quickly, in that timescale there couldn’t be a full OBR forecast. But we are committed to the OBR forecast.
“We are working together with the OBR. There will be an event on 23 November where the policies are fully analysed by the OBR, but it was a real priority to me to make sure we’re working to help struggling families.”
On Thursday, the chancellor committed to maintaining the triple lock on state pensions, which means they would rise in line with inflation (the triple lock means following whichever is higher consumer price inflation, average wage growth or 2.5%).
But the prime minister declined to offer a guarantee that benefits would also rise in line with inflation, despite a pledge from Boris Johnson’s government to do so.
Ms Truss said the issue is “something that the work and pensions secretary is looking at, and she will make an announcement in due course, as is the normal practice for the autumn”.
But the prime minister argued the reversal of the National Insurance hike and support for businesses’ energy bills will help families.
“I had real fears that businesses could go out of business this winter because they were facing unaffordable energy bills,” she added.
“We put in place a business scheme, we put in place support for households across the country. That has cost us money, but it was important we acted quickly.”
With the latest polls putting Labour more than 30 points ahead of the Conservatives, many backbenchers are concerned about the prospect of losing their seats at the next election.
Senior MP Charles Walker said on Friday the conversation is no longer about winning, but how much the party loses by.
But the prime minister declined to comment on whether her party is heading towards electoral defeat, responding that “100% of her focus” is on supporting “the British public and British businesses through this difficult winter”.
Fiscal watchdog to give initial forecast on mini-budget after meeting with PM and chancellor
Liz Truss and Kwasi Kwarteng have met the head of the UK’s independent fiscal watchdog amid the fallout from the government’s mini-budget.
The government confirmed that publication of the forecast would not be brought forward from 23 November – more than seven weeks away.
The Office for Budget Responsibility (OBR) confirmed it would deliver an initial forecast to the chancellor next week, which “will, as always, be based on our independent judgment about economic and fiscal prospects and the impact of the government’s policies”.
The talks with the OBR came at the end of a week of economic turmoil in which the pound plunged, nearly half of mortgages were pulled and pension funds were saved from collapse.
The government said the meeting was “usual”, but it is highly uncommon for a prime minister to attend an OBR meeting, which is normally held between the watchdog and the chancellor to discuss upcoming economic forecasts.
A statement from Downing Street said: “This morning the prime minister Liz Truss and Chancellor Kwasi Kwarteng met with the OBR’s Budget Responsibility Committee, including the Chair Richard Hughes, at Number 10 Downing Street.
“They discussed the process for the upcoming economic and fiscal forecast, which will be published on 23 November, and the economic and fiscal outlook.”
Mr Hughes confirmed the watchdog’s timetable after the meeting.
Speaking outside Downing Street, Mr Hughes said: “We are going to be providing the chancellor with an update next Friday, and we will set up a timetable for our forecast process next week.”
An OBR statement added: “We will deliver the first iteration of that forecast to the Chancellor on Friday 7 October and will set out the full timetable up to 23 November next week.”
The meeting came after criticism that an OBR forecast was not published alongside the chancellor’s mini-budget last week.
The OBR has a statutory requirement to provide two forecasts a year, and said it offered Mr Kwarteng one on his first day as chancellor.
The chancellor did not commission one, and the lack of analysis on the measures outlined in his financial statement is thought to have contributed to the turmoil in the markets in the past week.
The OBR was set up by the government in 2010 to provide independent analyses of the UK’s public finances.
Andrew Griffith, the financial secretary to the Treasury, told Sky News on Friday morning that it was a “very good idea” for Ms Truss and Mr Kwarteng to meet with the OBR.
Sir Charles Bean, a former deputy governor of the Bank of England, said such a summit is “quite unusual”.
Sir Charles said that meetings with the chancellor and OBR officials are not uncommon, but the prime minister less frequently talks with the watchdog.
He also said the meeting was like “closing the stable door after the horse had bolted”, as the OBR forecast needed to be released with the mini-budget to reassure markets.
£1bn Serco pension scheme seeks loan from outsourcer amid markets turmoil
The pension schemes of Serco, the government contractor, have approached their sponsor to seek financial support amid a funding crunch triggered by this week’s wild gyrations in financial markets.
Sky News has learnt that the outsourcing giant’s pension trustees contacted the company in recent days about establishing a new credit facility in the event of a continued deluge of collateral calls.
The request is thought to be highly unusual and highlights the turmoil caused even in well-funded and well-run corporate pension schemes by the sudden surge in gilt yields that followed last Friday’s fiscal statement by the chancellor, Kwasi Kwarteng.
The Bank of England intervened in financial markets on Wednesday by promising to buy tens of billions of pounds in government bonds during the next fortnight in an attempt to stabilise the market.
That followed a slump in sterling’s value against the dollar to its lowest-ever level and deep anxiety about investors’ appetite to buy UK government bonds.
Ministers have sought to blame the turmoil on global market forces, but Mr Kwarteng’s £45bn of unfunded tax cuts, announced in last week’s ‘mini-Budget’, have been held responsible by many analysts for sparking the most dangerous financial markets rout since the 2008 banking crisis.
A person close to Serco pointed out that its retirement schemes boasted a surplus, before tax, of £105.3m at its latest half-year results.
The source added that the standby loan request from its pension trustees was simply to provide liquidity to help it meet demands for additional collateral.
Corporate pension fund trustees were faced with no choice but to sell billions of pounds of equities and bonds this week to meet margin calls – forcing them to put up extra collateral – as gilt yields surged and upset delicately balanced hedging strategies.
The turmoil has drawn closer attention to so-called Liability-Driven Investing, which many pension schemes use financial instruments such as derivatives to help them match their long-term assets and liabilities.
The precise number of Serco’s pension scheme members was unclear on Friday.
Members’ retirement funds are not at risk as a consequence of the move to seek financial support from the schemes’ sponsor.
According to its most recent results, Serco makes annual deficit recovery payments of £6.6m, a figure that is fixed until 2030.
Serco is one of Britain’s biggest outsourcing groups, handling contracts for a multitude of government departments.
Earlier this month, the company announced that Rupert Soames, its long-serving chief executive and grandson of Sir Winston Churchill, would retire.
He is regarded as one of Britain’s most capable chief executives, having transformed erco’s fortunes since taking over in 2014.
Serco and its pension trustees both declined to comment.
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