Globalisation, the rise of online and a weak pound, the recipe for Ted Baker’s strength

Soaring online sales help Ted Baker to book a rise in full-year sales and profits, together with continued global expansion and a favourable currency exchange after Brexit.

Pre-tax profits rose 4.4 percent to 61.3 million pounds in the year to January 28 while total revenue rose 16.4 percent, or 10.8 percent on a constant currency basis, to 531 million pounds.

"We have continued to trade well and develop despite a backdrop of ongoing external challenges across our global markets. This success reflects the strength and appeal of the brand as well as the outstanding quality of our collections," summed a stellar period the company’s CEO, Ray Kelvin.

Ted Baker battles Brexit and its aftermaths rather well, according to analysts

Regarding its international performance, Ted Baker opened stores in China and Spain, noting however that increased levels of promotional activity and a fall in international tourism negatively impacted its results in the U.S. and Canada. In fact, in the UK and Europe, retail sales were up 10.7 percent to 279.5 million pounds, while in the U.S. and Canada they grew 28.3 percent to 103.4 million pounds.

Meanwhile, online revenue grew 35.1 percent to 72.3 million pounds.

It’s worth recalling that Kelvin promised earlier in the year that Ted Baker wouldn’t pass down to shoppers any price hikes. Back then, the company’s CEO explained that the combination of hedging against currency fluctuations and a dollar-denominated income from its US operations will help to mitigate the collapse in sterling following the Brexit vote.

Also remarkable is how, ahead of the UK’s permanence in the EU’s referendum, Ted Baker extended its hedging arrangements to April 2018, giving it an extra breathing space compared to other retailers, as highlighted by Reuters.

After seeing the results, Jefferies said it was confident Ted Baker can outperform and maintained its 'buy' recommendation after shares in the clothing retailer fell when it issued some cautious words about the U.S. trading outlook.

Keeping its price target of 2,820 pence per share, Jefferies said in an investors’ note that Ted Baker's brand strength, measured approach to growth and strong management team were the main appeal of the stock, with the shares closing at 17.6 times forecast earnings.

Despite the ongoing challenging market conditions, the company can outperform in this market, analysts at Jefferies felt. "The downside risks to consumer confidence and disposable income in TED's domestic market are well understood...And to the extent that declines in US sales densities are related to external factors we believe TED will continue to outperform peers."

Image:ted Baker Web

Image: Keeping with the Bakers, Ted Baker Web