Opening Quote: Ted Baker beats high street with wholesale gains

Spot the odd one out: New Look, House of Fraser, Marks and Spencer, Ted Baker. It’s not difficult, is it? You don’t even need to be a fashionista to work it out. Not only is Ted Baker the one clothes store with several people actually in it, buying items at full price and wearing them in a non-ironic non-‘normcore’ way, it is also the only fashion retailer not entirely exposed to the UK high street. Its wholesale and international operations provide a welcome counter to the desolation at the others’ counters.

After a few weeks in which department store House of Fraser has joined fashion chain New Look in seeking store closures and rent-saving company voluntary arrangements, while M&S accelerates its store closure plans, Ted Baker has reported a sales rise driven by more floor space.

In the 19 weeks to June 9, the group has achieved a 4.2 per cent rise in group revenue — or 7.5 per cent in constant currency terms. And that was driven by an average increase in retail square footage of 5.7 per cent — from 398,000 to 420,799 square feet. Tellingly, the group suggested its mix of wholesale and retail operations was a key differentiator, and made it more adaptable than traditional bricks-and-mortar high street rivals: “Our flexible business model, including a relatively low number of own stores, enables us to respond to structural changes in the retail sector”.

Wholesale sales for the period increased by 14.2 per cent — or 18.9 per cent in constant currency — reflecting strong performance in both the UK and North America, and the earlier timing of wholesale deliveries. Both wholesale and retail gross margins were also maintained in line with expectations.

Ted Baker noted that this sales growth was achieved despite the impact of unseasonal weather across Europe and the US east coast of in the early part of the year, on top of external trading conditions that remain “challenging across many of our global markets”.

It now anticipates achieving “at least high single-digit growth” in the wholesale business for the full year.

However, investors may ask if that signals an overall slowdown. If 14 per cent wholesale growth in the past 19 weeks translated to 4 per cent at group level, what does “high single-digit” wholesale growth lead to longer term? Ted Baker is up against tough comparatives: an 11 per cent rise in total revenue to £591.7m in the 52 weeks to January 27, delivering a 12 per cent increase in pre-tax profit to £68.8m. 

Still, this is the sort of slowdown that New Look, House of Fraser or Marks and Spencer would give their polyester clad right arms for. 

Of course, online-only fashion retailer boohoo.com need not worry about the boulevards of broken dreams and roads to ruin that traverse Britain’s CVA-blighted town centres. And, with an entire generation still happy to try on clothes for the first time after having bought them, it doesn’t have to.

It has just reported that young people bought 52 per cent more clothes without looking at them in the mirror first, in the three months to May 31. 

That lifted revenue to £183.6m for the quarter, with UK sales rising by 49 per cent and international sales by 60 per cent. Market share gains were achieved across all geographies, and the gross margin improved by a whole percentage point, to 55.2 per cent. 

But, again, this was technically a slowdown. Having recorded a near doubling of sales in the year to February 28 — a stellar 97 per cent increase to £579.8m — analysts had been concerned as to whether the company could sustain such growth. This trading updates suggests it cannot — although, to be fair, the company never expected that it could.

Today, it said that it continues to forecast a 35 to 40 per cent increase in group revenue for the full year, with an adjusted earnings margin of between 9 and 10 per cent. That is in line with previous forecasts, and medium term guidance is still to deliver sales growth of at least 25 per cent a year an a 10 per cent earnings margin.

Again, a slowdown to die for if you’re a high street rival.

Boohoo.com’s joint chief executives, Mahmud Kamani and Carol Kane, said:

"Our multi-brand strategy is delivering above-market rates of growth globally. Significant market share gains have been achieved in all of our key focus markets, with our compelling combination of the latest fashion at incredible prices, backed by great customer service resonating strongly with our customers. The scale of group revenue is aligning with our ambition to become one of the dominant global online retailers” 

And, finally, great customer service is not something one normally associates with the life insurance industry. Which is why the Financial Conduct Authority has been investigating the country’s biggest life assurers, looking into what they told customers about exit fees.

It said: “It is vital that customers are treated fairly and given the right information on an ongoing basis in order to help them make important financial decisions . . . We expect all firms with closed-book customers to . . . ensure they are treating their closed-book customers fairly.”

But, this morning, it has concluded that Scottish Widows did: the financial watchdog has decided not to take any enforcement action against the business. Instead, the regulator said it would be “raising a number of issues uncovered as part of the investigation with the firm”. The case, however, is now closed.

Today’s Lombard column discusses the Financial Reporting Council’s decision to fine KPMG over its audit of Quindell:

‘Financial Reporting Council to investigate audit of The South Sea Company, for the period ended December 31 1719. Report on 1637 audit of Tulips R Us (London & Amsterdam) expected next year . .. ’

A quip to this effect circulated on Twitter a few weeks ago, after the accountancy watchdog launched another of its less than timely probes: into the audits of software group Autonomy in 2009-11. So Monday’s news that the FRC had decided to fine KPMG for its audit of Quindell — a more recently scandal-hit, and still existent technology group — almost looked like progress. Quindell, now called Watchstone, did not come under investigation by the Serious Fraud Office until 2015. It might not be progress enough, though.

Read the rest of today’s Lombard column here. 

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can receive it by email at 8am every morning by signing up here.