Ted Baker’s Online Sales Overtake Retail As Some U.S. Stores Close

E-commerce at fashion retailer Ted Baker has taken the driving seat in the North American market as temporary store closures during statewide lockdowns over the spring and summer led consumers to shop on the internet.

In a trading update issued today for the 28 weeks to August 8, online sales leapt by 85% to $24 million (£17.9 million) to carve a 52% share of Ted Baker’s business, up from just 15% in the same period in 2019. The sharp share rise would have been helped to a degree by the U.K. listed company’s decision to close three U.S. stores, reducing the estate to 35 outlets.

Californian units in Malibu and Santa Monica, and in Scottsdale, Arizona—where, according to chief financial officer David Wolffe “the economics of reopening were unattractive”—all shut their doors.

The strong online performance was not enough to prevent revenue at the North American division sliding by 46% to $46 million in the period, a worse decline than in Ted Baker’s other key region of the U.K. and Europe which was down by 37% to $118 million.

Wolffe, who only joined the company in January 2020, said: “In comparison to the U.K. and Europe, (North American) disruption to trading in stores started later but was longer lasting, reflecting the varying local responses to Covid across the region, as well as political and social unrest.”

With group revenue also heavily down and losses widening Ted Baker’s stock sank by 12.5% to £1.17 at market close today.

“The Covid headwinds have been tough for us. They amplified some of our legacy issues and heavily impacted our city center and travel stores performance,” said Ted Baker CEO Rachel Osborne.

Some of these issues have centred around product range. Ted Baker is known for suits and more formal pieces, both of which have taken a big hit during the pandemic with so many people working from home.

Pippa Stephens, retail analyst at research consultancy GlobalData, commented: “Ted Baker’s troublesome performance comes as no surprise, since its specialism in formalwear increased its exposure to the impact of Covid-19, with many consumers shifting their spending towards casual or loungewear categories.

“While the retailer has attempted to adapt, it was too slow. Pressure from competitors also led Ted Baker to implement heavy discounting, including a ‘50% off everything’ promotion over Black Friday, drastically denting profit margins. This is also likely to have a significant impact on consumers’ perceptions of the brand.”

A turnaround plan in place

However, with a slew of six new senior executives brought onboard in the past year—including former Gant CEO Ari Hoffman as CEO North America and former Topshop global design director Anthony Cuthbertson as global creative director—the company believes it has the right team to improve its fortunes. Osborne said: “Our foundations are (now) fixed and we are confident in the delivery of our plans.”

Among these is a product pyramid—something that Ted Baker has not done before—ready for the fall/winter 2021 season. Key elements here are products with untried characteristics to break away from the safe formula the brand had relied on in the past. About 35% of collections will now be trend based, and 10% ‘concept’, the aim being to bring excitement to an up-to-now somewhat predictable offer.

In addition, Ted Baker is adding lines at both entry price and premium, and is launching a capsule collection called ‘Made in Britain’ at the top end of the pyramid which is both casual and fashion led. “Customers will see a change of direction in-store from spring/summer 2021,” said Osborne.

Stephens added: “Full-price sales must be a focus for Ted Baker as it launches its refreshed product ranges as part of its ‘Ted’s Growth Formula’ turnaround plan, or else it will risk devaluing the brand even further.”

Online has everyone’s attention

The dramatic flip to online in North America has also happened across the group and e-commerce now accounts for 60% of Ted Baker’s global sales. This comes after the company reported falling online sales in the previous financial year.

Sine then investment has included the addition of more payment options like Google Pay, Klarna and Apple Pay, as well as virtual personal shopping appointments in the U.S. and live chat. These extra elements should enable Ted Baker to continue to benefit from online spending next year.

Immediate worries revolve around the company’s concession relationship with collapsed, but still trading, U.K. department store Debenhams, though a rescue is in the offing. GlobalData says that “since the department store channel has experienced a steady decline in the U.K. over recent years, Ted Baker should start to decrease its dependence on this channel as quickly as possible, and instead focus on driving sales via its direct-to-consumer avenues, as well as its third-party online partners like Next and ASOS.”

In Ted Baker’s biggest market of the U.K., non-essential retail reopened in England on December 2 after a second lockdown. Data from the British Retail Consortium showed that on this day footfall increased by 150% compared with the previous week, but decreased by 26% versus the previous year.

With both the U.K. and the U.S. still experiencing high rates of Covid-19 infections, consumers continue to avoid physical stores. Ted Baker’s pivot to digital will therefore continue by necessity while its current season shift to “go deeper and wider” on casual and accessories like loungewear, jogs and sweats will accelerate in 2021.

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