TIDMTED

RNS Number : 5524T

Ted Baker PLC

21 July 2020

21 July 2020

Ted Baker Plc ("Ted Baker" or the "Company")

AGM Trading Update

For the 11 week period from 3 May 2020 to 18 July 2020 ("the period")

Resilient trading and good progress despite COVID19 disruption

Ted Baker Plc, the global lifestyle brand, today provides an update on trading for the 11 week period from 3 May 2020 to 18 July 2020, ahead of the Company's Annual General Meeting taking place this morning.

Key Highlights

-- Group trading has been resilient, with a particularly strong performance online, as the Group has taken a more dynamic trading stance since the beginning of the year, reflecting more sophisticated cross-category merchandising, refreshed social media activity and increased marketing spend.

-- Following the launch of Ted's Formula for Growth, our three-year transformation plan, we are pleased with the good progress and momentum made on all the key operational and financial milestones for FY21.

-- Net cash as of July 11 was GBP56.7m, ahead of management expectations due to strong cash management.

Financial Results

 
                       11 weeks to     Reported variance   Constant currency 
                       18 July 2020       year-on-year        variance(1) 
 Group revenue           GBP60.9m            (55%)               (55%) 
                     ---------------  ------------------  ------------------ 
    Retail               GBP51.0m            (50%)               (50%) 
                     ---------------  ------------------  ------------------ 
        Stores           GBP15.8m            (79%)               (79%) 
                     ---------------  ------------------  ------------------ 
        E-commerce       GBP35.2m             35%                 34% 
                     ---------------  ------------------  ------------------ 
    Wholesale            GBP7.4m             (75%)               (76%) 
                     ---------------  ------------------  ------------------ 
    Licence Income       GBP2.5m             (29%)               (29%) 
                     ---------------  ------------------  ------------------ 
 

Good progress against Ted's Formula for Growth

Ted's Formula for Growth, our three-year transformation plan, is designed to deliver a structurally more profitable business, with higher ROCE and higher sustainable free cash flow generation.

The business has made a strong start on the specific strategic targets set for FY23 of:

   --    5% medium term revenue growth 
   --    EBITDA margin of 7-10% by YE2023 
   --    At least GBP30m annual free cash flow by YE2023 
   --   Net debt/EBITDA of 1x or lower by YE2023 

As measures of progress towards the three-year financial targets, for the first year of the turnaround plan the Company set planned strategic progress markers, including:

   --    Structural bought in margin improvement 
   --    Continued focus on working capital efficiency 
   --    Reduced expenditure 
   --    Improved retail store profitability 
   --    Increased controls 

Against each of these markers good progress has been made:

-- Structural bought in margin improvement: SS21 collection will be sourced from fewer than 100 suppliers (previously over 150 suppliers) providing more concentrated negotiating power and buying efficiency.

-- Enhanced working capital efficiency: the stock buying cycle has been tightened from three years to two years, implemented for AW20, along with a reduced buy. In addition, negotiations with suppliers have produced improved payment terms.

-- Reduced capital expenditure - for FY21, capex has been restricted to less than GBP10m, against the previous guidance of GBP15m.

-- Reduced operating expenditure - central headcount savings of GBP15m annualised have been implemented, a significant increase on the GBP7m announced in February 2020. Of the GBP15m, we anticipate an FY21 saving of GBP7m.

-- Improving retail store profitability - store payroll savings of GBP12m annualised have been implemented, through restructuring across UK and North America stores, with anticipated FY21 cost saving of GBP5m. In addition, negotiations with landlords have so far yielded property cost savings of GBP3m. We anticipate volume driven rent savings for FY21 of GBP16m.

-- Increased controls - the controls remediation programme has been launched, supported by Deloitte and a new full-time programme manager. Delegated authorities and risk management processes across the business have been revised.

As part of the previously announced reduction in headcount, these initiatives across central functions and the retail store estate in the UK and North America are now expected to result in GBP12m of cost savings in the current financial year, GBP27m on an annualised basis. The cash cost associated with achieving these savings of GBP6m well be incurred in FY21.

Trading Update & Outlook

-- Overall trading has been ahead of the base case scenario provided alongside the Preliminary Results announcement on 1 June 2020. The base case scenario was one of two ranges set at the time of the equity raise, along with the reasonable worst case scenario which was used for funding requirements.

-- Online trading has remained significantly ahead of expectations, with the group continuing to benefit from consumer behaviour shifting to online, the uninterrupted operations of our global distribution centres and enhanced trading mechanics introduced during the year.

o E-commerce sales increased 35% and represented 69% of total retail sales (2019: 25%). This is significantly ahead of the 19% decline in the base case revenue scenario.

-- On 29 April 2020, the Company began a controlled re-opening of stores across Europe, North America and the UK. As at 18 July 2020, 95% of the store estate was open globally, and 75% of stores have been operational for the last four weeks. Like-for-like store sales were down 50% versus last year for the last four weeks of the trading period.

-- For the 11 weeks to 18 July, total retail sales fell 50%. Store revenue decreased 79%, with sales performance impacted by store closures globally. This compares to a 83% decline in the base case revenue scenario. Like-for-like store sales were down 52% versus last year.

-- Wholesale and licence revenue decreased 70% compared to 60% decline in the base case revenue scenario. The weaker performance reflects cautious ordering from store-based trustees since the early phase of the pandemic.

-- Increased social media engagement and more focused and targeted digital marketing activity has stimulated sales. Promotional activity has been elevated, but in line with peers, which has had some impact on Group gross margin as expected.

-- In common with many other public companies, the Board will continue to withhold guidance for the current financial year ended 30 January 2021 given the unprecedented uncertainty around the severity and duration of the impact of Covid-19.

Strong Balance Sheet:

-- As at 11 July, net cash was GBP56.7m, ahead of management expectations and reflecting actions taken to maximise cash and reduce expenditure.

-- The net cash position reflects an aggregate GBP173m of net proceeds from the previously announced sale of the UBB and capital raise.

-- Excluding the fundraising proceeds Net Debt would be GBP116.3m, an improvement during the past 16 weeks from the GBP137.8m Net Debt as at 22 March 2020.

-- As at 18 July, the Company has GBP161.7m of available headroom on current bank facilities of GBP108m, with an additional GBP25m becoming available from September 2020.

Rachel Osborne, Chief Executive Officer, commented:

" I am pleased with the early progress we have made in driving operational excellence and cost efficiencies since the launch of Ted's Formula for Growth in June. Our customers are engaging with the brand and responding to our COVID19 promotional activity, as evidenced by our resilient trading over the past 11 weeks.

Our performance is encouraging, but I caution that it is still early days, and we have a substantial amount of work to do over the next 12 months against a backdrop of significant uncertainty in the world. However, the Brand has an exciting future, and I am looking forward with cautious optimism that the initiatives currently underway across all areas of the business will bear fruit over the next 12 months."

(1) Constant currency comparatives are obtained by applying the exchange rates that were applicable for the 11 weeks ended 20 July 2019 to the financial results in overseas subsidiaries for the 11 weeks ended 18 July 2020 to remove the impact of exchange rate fluctuations.

CONTACT DETAILS

Ted Baker

Investor.relations@tedbaker.com

Rachel Osborne, Chief Executive Officer

David Wolffe, Chief Financial Officer

Phil Clark, Commercial and Strategy Director

   Tulchan Communications (Financial Communications)                       Tel: +44 (0) 20 7353 4200 

Jonathan Sibun / Jess Reid / Will Palfreyman E: tedbaker@tulchangroup.com

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END

AGMURUARRSUBUUR

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July 21, 2020 02:00 ET (06:00 GMT)

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