Ted Baker (LON:TED) announced that full-year group revenue increased by 4.4%, but profit before tax dropped by 26.1% to £50.9 million. It was the first annual fall in profit since the credit crisis. Discounting and a fragile consumer spending were blamed for the fall in earnings. E-commerce sales jumped by an impressive 20%. Even though the online department is registering strong gains, the company is still opening a few stores. The clothing company knows that e-commerce is the future, so it is selective in its store opening.
Ted Baker shares have endured volatility in recent months. Ray Kelvin, the founder of the firm resigned as CEO. There were allegations of misconduct levied against Mr Kelvin last year, and an investigation into his behaviour is underway. The fashion house has been under pressure recently due to the tough trading environment, and the management shakeup might add to the existing certainty.
Last October, the group confirmed it incurred a charge of £600,000 in relation to House of Fraser going into administration, and the group took a £4.7 million charge due to restructuring. Stripping out the exceptional costs, the group would have posted a 3.5% rise in first-half earnings. The fashion house confirmed that sales per square foot of store space dropped by 9%, and this underlines how tough it is on the high street. Online sales jumped by 24% in the first six months and the department is increasingly becoming an ‘important component’ of the business. Consumer habits are changing drastically, and Ted Baker will need to focus on the e-commerce side of the business if it wants to stay competitive.
Next (LON:NXT) confirmed that full-year group sales was £4.2 billion, and group profit before tax slipped by 0.4% to £722.9 million, while analysts were expecting £724 million. It was the third consecutive annual decline in profit. The clothing company expects full-year profit for 2019-2020 to be £715 million. The company continues to feel pain on the high street, but the online division is performing well. Annual Store sales fell by 7.9%, while e-commerce revenue jumped by 14.7%.
Next’s raised is full-year guidance in September, only to lower it in January, but the trimmed forecast wasn’t as bad as expected. The retailer blamed higher cost related to online sales and lower margins on beauty products for the lowering of the profit forecast. The high street took a hammering as in-store sales dropped by 9.2% in the third-quarter ,but online sales jumped by 15% ,and online sales now account for the majority of group revenue. It is encouraging to see the firm is embracing the changes in the sector.
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