Ted Baker woes deepen as retailer forced to revalue stock

An accounting scandal at Ted Baker is more than twice as big as initially estimated, the British fashion retailer said, adding to a stream of bad news over the past year and sending its shares down as much as 10%.

The company, known for suits, shirts and dresses with quirky details, said the value of stock on its balance sheet was overstated by £58m (€68m) as of January 26, 2019, more than double its preliminary estimate of up to £25m.

Ted Baker's tale of management and accounting woes Ted Baker, which has not revealed the reasons for the overstatement, said a review by business consultants Deloitte had largely been completed and it planned to update the market further at its preliminary results, expected in late March.

The overstatement was disclosed in December, weeks after the company appointed Rachel Osborne as its new finance head.

She was named acting chief executive officer later that month after the surprise exit of Lindsay Page.

It is the latest in a string of setbacks in the last year, including profit warnings, a decision to suspend dividend payments, and management changes after misconduct allegations against founder and top shareholder Ray Kelvin, which he denies.

Ted Baker shares have lost more than 80% of their value since December 2018, when the allegations about Mr Kelvin’s habit of hugging colleagues were first made.

The accounting scandal comes as Britain’s store groups struggle with subdued consumer spending and a switch to more shopping online. Ted Baker reiterated there would be no cash impact from adjustments to the value of prior year inventories.

The company in December appointed law firm Freshfields Bruckhaus Deringer to undertake an independent review of the overstatement alongside Deloitte.

In March last year, Mr Kelvin resigned as chief executive, seeking to allow the fashion brand he founded to move on from misconduct allegations.

The next month it reported its first drop in annual profit since the 2008 financial crisis, highlighting tough conditions on Britain’s high streets and named veteran Mr Page as its boss, also introducing changes to workplace standards.

In June, the company warned that underlying profit for the year would fall short of analysts’ estimates after an “extremely difficult” start to 2019.

Ted Baker subsequently appointed Debenhams veteran Rachel Osborne as its new finance chief but in October issued its second profit warning in four months on the back of what it calls the worst business conditions in decades.

-Reuters