Our short/sell recommendation on Ted Baker generated more than 30% investment returns for clients after the British retailer warned deep price cuts would lower FY profits.
On 11th June 2019, Ted Baker warned of lower profits for the full year in their quarterly trading update after the British fashion retailer was forced to make deeper price cuts to drive sales as it struggled with "extremely difficult" trading conditions.
Ted Baker shares lost 48% vs. STOXX 600 in 3 months
Management blamed a 2.6% slump in like-for-like retail sales and a 3.6% slump in wholesale comparable sales on cut-throat discounting amongst competing fashion retail chains, consumer uncertainty, unseasonably colder weather YOY in core markets, and disappointing results across their Spring/Summer collections.
Ted Baker Reveals "Extremely Difficult" Trading
Woozle's team of primary researchers uncovered evidence of deteriorating trading results in early May which suggested weaker than expected consumer appetite for new collections, surplus unsold inventory level build-ups, excess promotional intensity, and weaker store traffic & conversion rates which increased the likelihood of an earnings miss going into the trading update.
The client who commissioned the project was able to scale their short position with enough time to capitalise on a more than 30% plunge in the share price immediately following the results announcement.