Ted Baker warns on no-deal Brexit profit hit

Fashion retailer Ted Baker has warned that a no-deal Brexit will result in a £16.1 million drop in profit in 2021, should a deal fail to be reached in the coming weeks.

In a statement to investors David Wolffe, Chief Financial Officer at Ted Baker, said that as preparations for Brexit progressed it was planning mitigation strategies to offset the “negative impact” of higher duties. 

“There is material risk to our future profit if the UK is not successful in signing new trade agreements with the EU and other markets in which we operate,” said Wolffe.

“We have made administrative and legal changes to our operational processes, which will improve operational efficiency in both deal and no deal scenarios.  ThegGroup has been making good progress in the creation of a customs warehouse in the UK, expected to be in place before the end of 2020.  The main operational risk remains the flow of goods into the UK through the ports.”

Wolffe said the “worst-case” scenario full year impact was £16.1 million negative profit impact before any mitigation effects, reflecting no new trade deals. 

He added that Ted Baker anticipated, “only to a limited extent”, mitigating the extra cost of duties through the introduction of a customs warehouse in the UK, reflowing inventory for our EU stores and selective price increases.

In revealing its performance for the 28 weeks ending 8 August Ted Baker also said that it was being forced to participate in discounting in order to clear inventory levels, as other retailers were discounting in response to the second wave of lockdowns in the Uk and the EU.

However it also said that it was moving into to a two-year stock lifecycle, having previously run a three-year cycle, and it had been “aggressively clearing… aged inventory”. 

In a statement it said: “Alongside changes to our buying process and more active use of open to buy, we anticipate to end the current financial year in a clean inventory position, which would be a great achievement position us well for the new collections that we will be introducing…”

Last week the retailer revealed that it had automated order processing across all three floors of mezzanine at its 1 million sq ft warehouse in Derby.