(Reuters) - Ted Baker reported its first drop in annual profit since the 2008 financial crisis, highlighting tough conditions on Britain’s high streets, as the fashion retailer faces life without its founder.
Ray Kelvin, who developed the Ted Baker brand and had been CEO since the company’s launch in 1988, resigned last month after an investigation into “forced hugging” and “a culture that leaves harassment unchallenged.”
Kelvin, who denies all allegations of misconduct, remains the biggest shareholder.
Ted Baker had already warned last month that full-year earnings would miss forecasts due to volatile exchange rates, higher costs and a writedown on inventory.
Shares in the group, known for suits, shirts and dresses with quirky details, were down 2.9 percent at 1002 GMT, having hit their lowest on Thursday since a January boost from a reassuring Christmas trading update.
“The fashion house has been under pressure recently due to the tough trading environment, and the management shake-up might add to the existing uncertainty,” CMC Markets analyst David Madden said.
Ted Baker said it was investigating its policies, procedures and the handling of staff complaints and would reach conclusions early in the second quarter.
Acting Chief Executive Officer Lindsay Page told Reuters the board was determined to learn from what has happened.
“One thing that we did do was implement a revamped hot line where if people had any grievances to bring forward they were able to do that,” Commercial Director Phil Clark said.
When asked about Kelvin’s involvement in the business, Page said the retailer’s engagement with its founder would be as it would be with any major shareholder.
Ted Baker has said it is looking to appoint a successor to Kelvin.
Ted Baker said 2018 pretax profit fell 26.1 percent to 50.9 million pounds ($67 million), hurt by discounting.
Annual retail sales rose 4.2 percent to 461 million pounds including its online business, the company said.
“These are turbulent times for Ted,” George Salmon, Equity Analyst at Hargreaves Lansdown, said. “Tellingly, in-store sales densities in the key UK, European and US markets are falling, and with the group having to cut prices to stay competitive, margins have gone into reverse.”
Ted Baker will spend part of a 31 million pounds budget to expand in Belgium, Germany and the United States in 2019. The group has about 560 stores and concessions globally.
The company, which opened its first store in Glasgow in 1988, said it remained confident in its spring and summer collections.
It also said it had come up with contingency plans to minimise disruptions caused by Brexit, including forming a group to work with external advisers to identify the main risks.
Reporting by Noor Zainab Hussain and Tanishaa Nadkar in Bengaluru; Editing by Bernard Orr/David Holmes/Jane Merriman