Shares Magazine - August 22, 2019

GREAT IDEAS

22 August 2019 | SHARES | 1 

Shares in the quirky and quintessentially British fashion brand have fallen too far

Ted Baker shares are

just too cheap to ignore

W

e think you should

buy lately-unloved

global lifestyle brand

Ted Baker (TED) at 912p.

This isn’t a trade for the faint

ŽĨŚĞĂƌƚĂƐƚŚĞĐƵƌƌĞŶƚǀĂůƵĂƟŽŶ

ŝƐĚŝƐĐŽƵŶƟŶŐƚŚĂƚĂůƌĞĂĚLJͲ

ĚŽǁŶŐƌĂĚĞĚƉƌŽĮƚĞƐƟŵĂƚĞƐ

ŵĂLJLJĞƚďĞŵŝƐƐĞĚ͕ďƵƚShares

ƐƟůůŚĂƐĨĂŝƚŚŝŶƚŚĞƐƚƌĞŶŐƚŚ

of the Ted Baker brand and its

ŐůŽďĂůŐƌŽǁƚŚƉŽƚĞŶƟĂů͘

WHY TED’S DOWNTRODDEN

Shares in Ted Baker have

ƚƵŵďůĞĚςϮйĨƌŽŵƚŚĞŝƌŽŶĞͲ

LJĞĂƌƉĞĂŬŽĨάϮϯ͘ϳΘŽŶĂŇƵƌƌLJ

of earnings downgrades.

Recent trading

ĚŝƐĂƉƉŽŝŶƚŵĞŶƚƐƌĞŇĞĐƚĂƚŽdžŝĐ

ĐŽŵďŝŶĂƟŽŶŽĨĐŽŶƐƵŵĞƌ

ƵŶĐĞƌƚĂŝŶƚLJ͕ŚĞŝŐŚƚĞŶĞĚ

ƉƌŽŵŽƟŽŶĂůĂĐƟǀŝƚLJĂĐƌŽƐƐ

ŐůŽďĂůŵĂƌŬĞƚƐ͕ďĂĚǁĞĂƚŚĞƌŝŶ

EŽƌƚŚŵĞƌŝĐĂ͕ĂĚǀĞƌƐĞĐƵƌƌĞŶĐLJ

ŵŽǀĞƐĂŶĚǁŽŵĞŶƐǁĞĂƌ

product issues.

^ĞŶƟŵĞŶƚƚŽǁĂƌĚƐƚŚĞƐƚŽĐŬ

ǁĂƐĂůƐŽŚŝƚďLJƚŚĞƌĞƐŝŐŶĂƟŽŶ

(4 Mar) of founder and chief

ĞdžĞĐƵƟǀĞŽĸĐĞƌ;KͿZĂLJ

Kelvin following a probe into

͚ŚƵŐŐŝŶŐ͛ĐůĂŝŵƐ;ƐƚƌĞŶƵŽƵƐůLJ

ĚĞŶŝĞĚďLJ<ĞůǀŝŶͿŵĂĚĞďLJ

ƐŽŵĞĞŵƉůŽLJĞĞƐ͘

TED LOOKS TEMPTING

Ted Baker has issued two

ƉƌŽĮƚǁĂƌŶŝŶŐƐƐŝŶĐĞ&ĞďƌƵĂƌLJ

and because such setbacks

ƚĞŶĚƚŽĐŽŵĞŝŶƚŚƌĞĞƐ͕

recovery investors should

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2018 2019

TED BAKER

ďƌĂĐĞƚŚĞŵƐĞůǀĞƐĨŽƌĨƵƌƚŚĞƌ

ǀŽůĂƟůŝƚLJĂƐƚŚĞƌĞƚĂŝůĞƌĐŽƵůĚ

be forced to cough up another

earnings alert.

zĞƚƚŚĞƋƵŝŶƚĞƐƐĞŶƟĂůůLJ

ƌŝƟƐŚĐůŽƚŚŝŶŐůĂďĞůƌĞŵĂŝŶƐ

an outstanding brand and Ted

ĂŬĞƌŝƐƐƟůůĂŚŝŐŚͲƋƵĂůŝƚLJ͕ǁĞůůͲ

invested business with a growing

ĞͲĐŽŵŵĞƌĐĞŽƉĞƌĂƟŽŶĂŶĚ

considerable scope for growth in

ŽǀĞƌƐĞĂƐŵĂƌŬĞƚƐ͘

DŽƌĞŽǀĞƌ͕ŐŝǀĞŶƚŚĞĐƵƌƌĞŶƚ

ďŽŵďĞĚͲŽƵƚǀĂůƵĂƟŽŶ͕ƚŚĞ

ƐŚŝƌƚƐ͕ƐƵŝƚƐĂŶĚĨƌĂŐƌĂŶĐĞƐ

designer appears vulnerable

to an approach which ‘could

ĐŽŵĞĨƌŽŵĂŶƵŵďĞƌŽĨ

ĚŝīĞƌĞŶƚƐŽƵƌĐĞƐ͛ĂĐĐŽƌĚŝŶŐƚŽ

>ŝďĞƌƵŵĂƉŝƚĂů͘

Ray Kelvin was recently

ƌƵŵŽƵƌĞĚƚŽďĞĐŽŶƐŝĚĞƌŝŶŐĂ

bid with private equity backing

ŝŶŽƌĚĞƌƚŽƚĂŬĞƚŚĞƌĞƚĂŝůĞƌŽī

ƚŚĞƐƚŽĐŬŵĂƌŬĞƚ͘ŶLJƚĂŬĞŽǀĞƌ

bid would surely need to be

ƉŝƚĐŚĞĚĂƚĂƐƵďƐƚĂŶƟĂůƉƌĞŵŝƵŵ

to current levels to win over

ƐŚĂƌĞŚŽůĚĞƌƐ͕ŶŽƚǁŝƚŚƐƚĂŶĚŝŶŐ

<ĞůǀŝŶ͛ƐϯρйƐƚĂŬĞ͘

NEXT LEVEL OPPORTUNITY

ŶĚŝŶĂŶĞdžĐŝƟŶŐĚĞǀĞůŽƉŵĞŶƚ͕

dĞĚĂŬĞƌŚĂƐƐŝŐŶĞĚ;ϭςƵŐͿĂ

ŶĞǁƉƌŽĚƵĐƚůŝĐĞŶĐĞĂŐƌĞĞŵĞŶƚ

with Next (NXT)

ͷ replacing an

ĞdžŝƐƟŶŐĚĞĂůǁŝƚŚ

ĞďĞŶŚĂŵƐʹŝŶ

order to accelerate

ƚŚĞĞdžƉĂŶƐŝŽŶŽĨ

its childrenswear

ĐŽůůĞĐƟŽŶƐ͘

WĂƌƚŶĞƌŝŶŐǁŝƚŚEĞdžƚďƌŝŶŐƐ

Ted Baker access to the clothing

giant’s global sourcing and

ĚŝƐƚƌŝďƵƟŽŶĐĂƉĂďŝůŝƟĞƐ͘KǀĞƌ

ƟŵĞ͕ƚŚŝƐĚĞĂůƐŚŽƵůĚĚƌŝǀĞ

ŝŶĐƌĞŵĞŶƚĂůŐƌŽǁƚŚĨŽƌdĞĚ

ĂŬĞƌ͛ƐŚŝŐŚŵĂƌŐŝŶůŝĐĞŶƐŝŶŐ

ĚŝǀŝƐŝŽŶ͕ǁŚŝĐŚĐŚŝƉƐŝŶŽǀĞƌϯϬй

of group earnings before interest

ĂŶĚƚĂdž;/dͿ͘

&ŽƌƚŚĞLJĞĂƌƚŽ:ĂŶƵĂƌLJ

ϮϬϮϬ͕>ŝďĞƌƵŵ͕ǁŚŽƐĞάϭϮ͘ΘϬ

ƉƌŝĐĞƚĂƌŐĞƚŝŵƉůŝĞƐκϬй

ƉŽƚĞŶƟĂůƵƉƐŝĚĞ͕ĨŽƌĞĐĂƐƚƐĂŶ

ĂĚũƵƐƚĞĚƉƌĞͲƚĂdžƉƌŽĮƚĚƌŽƉ

ƚŽάρϬ͘ϯŵ;ϮϬϭε͗άςϯŵͿĂŚĞĂĚ

ŽĨƌĞĐŽǀĞƌLJƚŽάρϯ͘ϮŵĂŶĚ

άρς͘ϯŵĨŽƌϮϬϮϭĂŶĚϮϬϮϮ

ƌĞƐƉĞĐƟǀĞůLJ͘

Based on this year’s earnings

per share forecast of 88.1p

;ϮϬϭε͗ϭϭκ͘ϭƉͿĂŶĚκρ͘ϯƉ;ϮϬϭε͗

Ted Baker looks too cheap on

ĂďƵĚŐĞƚͲůŽŽŬŝŶŐƉƌŽƐƉĞĐƟǀĞ

ĞĂƌŶŝŶŐƐŵƵůƟƉůĞŽĨϭϬ͘κǁŝƚŚĂ

LJŝĞůĚĂƉƉƌŽĂĐŚŝŶŐρй͘

TED BAKER È BUY

(TED) 912p

Stop loss: 729.6p

Market value: £401.77m