Fashion giant Ted Baker raises £95 million of lifeline funds amid massive losses
The disgraced founder of troubled fashion brand Ted Baker today threw his weight behind a cut-price rescue fundraiser after its profits collapsed last year.
Ray Kelvin backed a plan to raise £95 million — more than the value of the entire company — as the ousted tycoon attempted to avoid seeing his majority shareholding being wiped out.
The 75p-a-share raising, advised on by Goldman Sachs and Liberum, represents a deep discount to Friday’s 153.3p closing price. The shares, down 90% over the last year, fell a further 10% to 137p, valuing Ted at just £62 million.
Kelvin exited last year after facing claims he forced hugs upon staff, which he denies. Chief executive Lindsay Page and chairman David Bernstein both later stepped down as well. Kelvin, a 35% shareholder, backed the raiser alongside the retailer’s second largest investor, Toscafund. The hedge fund is run by Martin Hughes, nicknamed “the Rottweiler”, and has a 14.5% stake. Both backers also approved the £72 million sale and leaseback of The Ugly Brown Building, its Camden head office.
The funds will be used to cut debts and help the company through the Covid crisis, with all of its 201 stores closed until at least June 15. The raise was unveiled alongside CEO Rachel Osborne’s turnaround plan for the retailer, which posted a string of profit warnings and admitted to a £58 million stock misstatement over the last year.
It swung from a £30.7 million profit the prior year to a £79.9 million loss in the year to January 25. Annual revenues were down 1.4% to £630.5 million, and crashed 36% in the 14 weeks to May 2 as Covid bit. Osborne, who took charge in March, blamed the plunge on the business not reacting to weak consumer sentiment and discounting by rivals. “We did not move quickly or effectively enough to reduce expenses, which affected profitability,” she said.
The company said: "The board recognises that last year's performance was disappointing for all of Ted Baker's stakeholders, reflecting a challenging external environment as well as significant internal disruption, driven by a number of senior leadership departures.”
The company said the newly-raised funds would allow it to invest behind its "inherent strengths", which it said were a strong brand and diverse distribution via its own shops, wholesaling and licensing, as well as its wide product ranges and wide geographical spread.
Having undergone a review of the business with consultants AlixPartners in a move it has previously said would cut head office costs in the UK and US, it would now focus on improving its online operations, cut spending and manage cashflow more efficiently. It would also cut its rent and payroll bills in stores.
Osborne’s revival strategy centres on tightening cost controls, improving its social media, investing £6 million in ecommerce, releasing new designs more often and broadening its price range, including cheaper products.
Osborne also hopes to expand internationally in key markets — including China, India, the US and the Middle East — through franchise agreements. She has already made head office jobs cuts and more are expected to follow. It will also reduce the number of suppliers it uses.
“Ted is a strong brand with multiple routes to market and a long runway to growth,” she said. Beefing up its online operation will be key to improving revenues, with digital sales up 50% this year and 78% since lockdown in March.
Veteran City analyst Nick Bubb said that Kelvin had “stumped up to avoid losing everything” but questioned why Ted needed to raise as much as £95 million given the head office sale.
AJ Bell investment director Russ Mould said the raiser gave “breathing space” to enact the turnaround plan. “The growth strategy is a mixture of common sense and recognition that it needs to be sharper on cost control, engaging with customers and better with product appeal,” he said.
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