Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THE pandemic took a grim toll on the UK high street. More than 11,000 shops have permanently closed, with chain stores and city centres hit hardest1. Major retail groups such as Debenhams, Topshop and Dorothy Perkins have left the stage and those that remain are scrambling to survive.

In this toughest of tough environments, Ted Baker (TED) has been clinging on by its fingertips. It many respects, it shouldn’t have been one of the survivors. It specialised in office-wear at a time when no-one was in the office. It had stores in expensive locations, such as the City and West End, at a time when everyone was at home and footfall dwindled. It has had to weather the departure of its founder and chief executive at a time when the company was in dire need of an experienced hand.

Ted Baker was already struggling before the pandemic hit. It had seen its share price drop from over 2,500p in 2018 to 195p at the start of the pandemic. Its ‘white knight’ is chief executive, Rachel Osborne, who has masterminded a turnaround programme. She was finance director at Debenhams and Dunelm, so has some experience of struggling retailers. She has now been in the post almost two years and the pandemic has given impetus to her transformation efforts.

Among Osborne’s priorities has been to sort out the group’s property portfolio. The company received a significant cash injection from the sale and leaseback of its former headquarters2. To date, Ted Baker has also managed to negotiate rent savings of £8m across its 520 stores. It has saved another £27.8m by tying its rental repayments to turnover3. It is now experimenting with small town pop-ups on short leases in areas such as Cardiff, Stratford and Lakeside.

It has also changed its product mix to reflect the new working-from-home environment and to broaden its appeal. At the same time, it has sought to build its online presence. While this cannot compensate for the loss of store sales, it needs to happen for the brand to have a chance at rebuilding. Early signs are mixed and this will be a closely-watched element of its update next week.

There are signs that the market is starting to believe that Ted Baker might come through this. The share price has moved from lows of 85.5p to its current level of 156p. Recent results have been received well. There is an argument that with so many of its competitors leaving the market, Ted Baker may be able to build market share as trading resumes in earnest and people head back to the office.

The retailer isn’t in the clear. The high street is still under pressure and fashion is the toughest area to navigate. People are heading back to the office, but not as often and in more casual clothes. However, expectations for Ted Baker remain at rock bottom. If Osborne does pull off this audacious turnaround, investors may find the share price moves quickly.

More on Ted Baker

Five year performance

(%) As at 1 Sept

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Ted Baker -3.8 -9.2 -57.1 -85.8 50.0

Past performance is not a reliable indicator of future returns

Source: FE, total returns in GBP as at 1.9.21

Source:

1  https://www.theguardian.com/business/2021/mar/24/british-high-street-lost-11000-shops-in-2020-study-shows

2  https://www.egi.co.uk/news/ted-baker-completes-sale-and-leaseback-of-ugly-brown-building/

3  https://www.ft.com/content/78b46c68-2fc2-44f6-85aa-3c056d1aa0ff

Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

Share this article

Latest articles

Watch: Market News Update - 16 May 2022

In this week’s market update: another down week for shares; bond markets catc…


Tom Stevenson

Tom Stevenson

Fidelity International

Market news today - Contrarians sense a turning point

What’s driving your investments this week?


Tom Stevenson

Tom Stevenson

Fidelity International

How to turn a profit in the post-Covid market

A bigger state and rising inflation means it really may be different this time


Tom Stevenson

Tom Stevenson

Fidelity International