Old in Ascendant 4/4/00

Ted Baker - Thursday 4th October 2001

REFS Website Fundamentals Price Archive Annual report

Ted Baker is proof positive of the power of a strong brand. As today's results show, the designer-retailer's fashion conscious followers are queuing up to be seen in its latest gear, sending total sales up 40% to £27.8m in the six months to August 11. Long-term, Ted Baker offers bags of potential, although in the short-term, it is unlikely that the shares will scale previous heights writes Sonia Kaur.
The people behind Ted Baker are renowned for keeping their brand "one of fashion's best kept secrets." Shunning all forms of traditional advertising, they rely on word-of-mouth and eye-catching shop displays to push the trendy retailer's highly versatile and expanding product range.

The result: five years of very stylish growth. Since 1997, sales have soared from £14m to last year's £47m, while profits have almost doubled to £8.1m.

Today's interims for the six mionths to August 11 were equally sparkling. Hot demand for Ted's women's range helped turnover rise 40% to £27.8m, while pre-tax profits grew 19% to £2.5m. Earnings per share rose 13.5% to 4.2p and the interim dividend goes up 13% to 2.7p.

Gross margins were the one grey area, down from 57.9% to 55.7%, reflecting the early start to the summer sale and a higher number of lower-margin designer-discount stores. Encouragingly, margins have crept higher in the second-half and finance director Lindsey Page is confident that full-year margins will exceed first-half levels.

Statistics released yesterday show September retail sales boiling away at their fastest rate for five years. In the seven weeks to September 29, the well-received autumn-winter jeans collection helped pushed total retail sales 59% ahead of the same period last year, while wholesale sales are a storming 81% ahead.

Baker was originally marketed as a casual "lads" label, especially in high-quality shirts. Extension of the brand into Ted Baker Woman, Ted Baker Endurance and Teddy Girl and related accessories such as perfumes, shoes and sunglasses have been smart moves. Womenswear, a notoriously hard market to win over, saw sales rise 51% and now accounts for 43% of group sales. The up and coming kids ranges, shoes and homewares saw sales rise 162% to £1.9m. Meanwhile the innovative Endurance menswear range, which includes wrinkle-free shirts and clubbers' shirts that tackle the waft of body odour are also proving a hit with its clientele.

Ted Baker now trades from 22 retail stores of their own and 572 third-party wholesale outlets, described as "trustees" by the company. 2000/01 was a period of heavy infrastructure investment, but this year the pace will slow down considerably as the group concentrates on development through licensing its worldwide brand.

This is the more exciting leg of Ted's business. It provides the opportunity to sell the group's designer-brands at good margins through established players overseas. In February last year, Ted signed a 5 year US deal with the well-regarded Hartmax and clinched a footwear deal with Pentland. Under the terms of the former, Hartmax manufactures, markets and distributes the product and Ted gets a bridgehead into US department stores, earning a royalty on all sales.

Whilst it is early days yet - the latest deal helped push licence income from £269,000 to a still-modest £703,000 in in the latest period - it has heaps of potential with limited downside. Management led by chief executive Ray Kelvin has proved skilful in its deal-making. In anticipation of hard-times ahead, it has locked Hartmax into a minimum guranteed royalty level of $11m over 5 years, payable regardless of whatever happens to the US economy.

Looking ahead, the group will develop a wholesale business in Switzerland next year, to add to its retail outlets dotted around France and Zurich. Ultimately, the group aims to export is brand as far afield as the Far East.

Cynics would argue that with 75% of profits hanging on the crucial Christmas period and around 40% of sales dependent on its six London stores, a lot could go wrong between now and next year.

Erring on the side of caution, long-time fan Teather and Greenwood has stuck to its full-year pre-tax forecast of £9.5m and earnings per share of 15.8p, rising to £10.8m and 18p in 2003. At current levels, T&G analyst Rowan Morgan rates the shares, up 19p to 277.5p, a 'strong buy' for those investors with a long-term view.

Trading on a rolling forward price-earnings ratio of 16, the shares are hardly bargain- basement cheap, especially as expected earnings growth is no higher than the earnings multiple. But Morgan suggests that, while the shares are unlikely to scale March 2000's high of 500p in the short-term, the power of the brand could lead to a significant re-rating over time. So even with Kelvin sitting on 45% of the equity, the shares look attractive for those with a long-term view.-

Tell us what you think - Click here to e-mail your comments to Sonia Kaur at skaur@hemscott.co.uk

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Ted Baker - Thursday 4th October 2001
	REFS Website Fundamentals Price Archive Annual report
Ted Baker is proof positive of the power of a strong brand. As today's results show, the designer-retailer's fashion conscious followers are queuing up to be seen in its latest gear, sending total sales up 40% to £27.8m in the six months to August 11. Long-term, Ted Baker offers bags of potential, although in the short-term, it is unlikely that the shares will scale previous heights writes Sonia Kaur. The people behind Ted Baker are renowned for keeping their brand "one of fashion's best kept secrets." Shunning all forms of traditional advertising, they rely on word-of-mouth and eye-catching shop displays to push the trendy retailer's highly versatile and expanding product range. The result: five years of very stylish growth. Since 1997, sales have soared from £14m to last year's £47m, while profits have almost doubled to £8.1m. Today's interims for the six mionths to August 11 were equally sparkling. Hot demand for Ted's women's range helped turnover rise 40% to £27.8m, while pre-tax profits grew 19% to £2.5m. Earnings per share rose 13.5% to 4.2p and the interim dividend goes up 13% to 2.7p. Gross margins were the one grey area, down from 57.9% to 55.7%, reflecting the early start to the summer sale and a higher number of lower-margin designer-discount stores. Encouragingly, margins have crept higher in the second-half and finance director Lindsey Page is confident that full-year margins will exceed first-half levels. Statistics released yesterday show September retail sales boiling away at their fastest rate for five years. In the seven weeks to September 29, the well-received autumn-winter jeans collection helped pushed total retail sales 59% ahead of the same period last year, while wholesale sales are a storming 81% ahead. Baker was originally marketed as a casual "lads" label, especially in high-quality shirts. Extension of the brand into Ted Baker Woman, Ted Baker Endurance and Teddy Girl and related accessories such as perfumes, shoes and sunglasses have been smart moves. Womenswear, a notoriously hard market to win over, saw sales rise 51% and now accounts for 43% of group sales. The up and coming kids ranges, shoes and homewares saw sales rise 162% to £1.9m. Meanwhile the innovative Endurance menswear range, which includes wrinkle-free shirts and clubbers' shirts that tackle the waft of body odour are also proving a hit with its clientele. Ted Baker now trades from 22 retail stores of their own and 572 third-party wholesale outlets, described as "trustees" by the company. 2000/01 was a period of heavy infrastructure investment, but this year the pace will slow down considerably as the group concentrates on development through licensing its worldwide brand. This is the more exciting leg of Ted's business. It provides the opportunity to sell the group's designer-brands at good margins through established players overseas. In February last year, Ted signed a 5 year US deal with the well-regarded Hartmax and clinched a footwear deal with Pentland. Under the terms of the former, Hartmax manufactures, markets and distributes the product and Ted gets a bridgehead into US department stores, earning a royalty on all sales. Whilst it is early days yet - the latest deal helped push licence income from £269,000 to a still-modest £703,000 in in the latest period - it has heaps of potential with limited downside. Management led by chief executive Ray Kelvin has proved skilful in its deal-making. In anticipation of hard-times ahead, it has locked Hartmax into a minimum guranteed royalty level of $11m over 5 years, payable regardless of whatever happens to the US economy. Looking ahead, the group will develop a wholesale business in Switzerland next year, to add to its retail outlets dotted around France and Zurich. Ultimately, the group aims to export is brand as far afield as the Far East. Cynics would argue that with 75% of profits hanging on the crucial Christmas period and around 40% of sales dependent on its six London stores, a lot could go wrong between now and next year. Erring on the side of caution, long-time fan Teather and Greenwood has stuck to its full-year pre-tax forecast of £9.5m and earnings per share of 15.8p, rising to £10.8m and 18p in 2003. At current levels, T&G analyst Rowan Morgan rates the shares, up 19p to 277.5p, a 'strong buy' for those investors with a long-term view. Trading on a rolling forward price-earnings ratio of 16, the shares are hardly bargain- basement cheap, especially as expected earnings growth is no higher than the earnings multiple. But Morgan suggests that, while the shares are unlikely to scale March 2000's high of 500p in the short-term, the power of the brand could lead to a significant re-rating over time. So even with Kelvin sitting on 45% of the equity, the shares look attractive for those with a long-term view.-
Tell us what you think - Click here to e-mail your comments to Sonia Kaur at skaur@hemscott.co.uk