What's going on?
British luxury brand Ted Baker’s stock fell almost 30% on Tuesday after it warned investors its annual profit would be lower than expected – for the third time this year (tweet this).
What does this mean?
Over its 30-year history, Ted Baker’s gone from a single store in Scotland to 200 around the world, baking its garments into the fabric of the “accessible luxury” scene. But in North America, which accounts for a third of Ted Baker’s revenue, recent unseasonable weather – a common retail bugbear – has meant fewer shoppers through the doors. Tough competition from budget rivals was partially offset by the company cutting its own product prices, although that led to a lower profit margin. As a result, not-so-super Ted’s 2019 profit may be lower than last year’s – and significantly below investors’ forecasts.
Why should I care?
For markets: The Great British Baker Off.
Investors were hot, cross bunnies when it came to Ted Baker’s stock on Tuesday. Since investors like to forecast a company’s earnings far into the future, and use those forecasts to determine what a stock’s worth today, they tend to shun firms where future profits are particularly uncertain. And Ted Baker now plans to focus on cutting costs to meet its latest profit target – rather than, say, doubling down on marketing to win over customers – which makes it harder for investors to be confident that next year’s earnings will grow.
Zooming out: A miracle on the Hudson?
On Monday, the chairman of North America’s oldest retailer, the Hudson’s Bay Company, teamed up with a group of other shareholders to make an offer for the 43% of the business they don’t already own. The struggling Hudson’s been selling off subsidiaries as it restructures – and the investors may think this has a better chance of succeeding away from the prying eyes of public shareholders. The same might be true of Ted Baker; but its former CEO and remaining majority shareholder, recently ostracized following misconduct allegations, seems an unlikely buyer.