Ted Baker needs a reboot

Kelvin: leaving under a cloud
Ted Baker, the clothing chain, has been a rare retail success story on the high street. Now it is in the headlines for the wrong reasons. Matthew Partridge reports.

The news that Ray Kelvin will quit immediately as the CEO of Ted Baker has “ended three months of uncertainty”, says Matthew Vincent in the Financial Times. His exit follows allegations of inappropriate behaviour, including unwanted hugs, and harassment of staff. The growing scandal “appeared to have weighed heavily on investors’ minds”, as shown by a dramatic fall in the company’s share price last week, on the back of a minor one-off warning about costs. Investors certainly seemed relieved, with the shares surging 5% on news of the announcement. Chairman David Bernstein will also be leaving within the next 18 months.
“Mr Kelvin cannot be the last Ted Baker director to go over this episode,” says Alistair Osborne in The Times. The scandal has “exposed a grubby culture and a dinosaur board”. The board’s “staleness” is also an issue, says Nils Pratley in The Guardian. A case in point is the fact that the current chairman has been on the board since 2003, even though the corporate governance code for listed companies suggests that non-executive directors should serve a maximum of nine years. Nothing less than “a full boardroom reboot” will do.
Boosting the business
A change of CEO and the eventual departure of the chairman is the “right thing for the business”, says Andrea Felsted for Bloomberg. However, it is only “the first phase of efforts to stabilise and refresh the brand”. The immediate priority is to find a permanent replacement for the interim CEO Lindsay Page who was previously chief financial officer and Kelvin’s “right-hand man”. Not only would this allow Page “to resume his focus on finance, operations and support for the creative team”, but it would also allow someone new to “refresh” a brand that is beginning to look a little tired.
Kelvin’s departure will inevitably be “disruptive” as he has “been at the helm of the brand for its entire life”, says Julia Bradshaw in The Daily Telegraph. It also comes at an “awkward” time for the company, which has just warned shareholders that “full-year profits would probably dip for just the second time in nearly two decades”. Still, shareholders may take comfort from the fact that the public is “quick to forget” about any scandal, especially those “key consumers” in China and America, while the brand remains “popular the world over”. Indeed, it’s important to remember that at a time when middle-market retailers are getting “crushed for not having an identity”,
Ted Baker’s “quirky” offering has often provided a “welcome antidote” to the high-street “doom and gloom”, as City AM points out. While many investors are not convinced that the changes are enough to ensure that the “hard-fought” brand will be protected, Kelvin’s departure at least demonstrates that Ted Baker “values its future more than its history”.
M&S enters food delivery business
Investors in Marks & Spencer (M&S) have been “positively falling over each other in the race for the exit”, says James Moore in The Independent. Just after a £750m joint venture with online retailer Ocado was announced last week – to be paid for by a “savage” cut to the dividend and a rights issue – the shares slumped by nearly 20%. But the move makes sense. It fills a glaring hole in the M&S armoury: the “lack of a food-delivery business”. It also makes its general merchandise available via the “successful” Ocado platform.
Teaming up with Ocado “gives M&S access to a huge range of 50,000 individual lines and a much larger average basket size compared with its own”, says Jonathan Eley in the Financial Times. Still, it is paying a very high price for its stake in the venture, equivalent to 40 times earnings. It will now have to sell its own shares “at
a fraction of that multiple” , while the dividend cut is likely to be “received badly” by shareholders, many of whom own the stock for income. Indeed, the joint venture is almost a “sideshow” compared with the decision to cut the dividend, says Oliver Shah in The Sunday Times. However, while the change would have the late founders “turning in their graves”, M&S has been “clinging to its status as blue-chip dividend stock for too long”. The cut shows that management is finally realising the group “faces an existential threat” and “if it follows the same path it has for decades, it will eventually die”. The “sharp jolt” provided by the cut will hopefully alert shareholders “to the danger that M&S is in”, giving the board “more room for manoeuvre”.
City talk
Maurice Tulloch, who was appointed Aviva’s CEO this week, has been tasked with “re-energising” the company, says Michael Bow in the Evening Standard. Thanks to a “string of mis-steps” by his predecessor Mark Wilson, including “controversial” plans to cancel special preference shares, the share price “has flatlined” in recent years. Tulloch’s “international background” could shift Aviva’s focus away from the low-growth UK life business towards “bigger-ticket” property insurance abroad. But income investors beware: Tulloch may well end the firm’s “generous” dividend policy by cutting the payout to fund more investment.
Debenhams’ “rushed” announcement of another profit warning is “not that much of a surprise”, says Dominic O’Connell on the BBC, given the crisis that has engulfed the group. However, it is “also a coded admission that the company is looking in earnest at a sweeping financial restructuring”, such as a debt-for-equity swap, wiping out shareholders, or a company voluntary arrangement, which would let it “get rid of unwanted liabilities such as pensions and long-term leases”. The company’s future is “hanging in the balance”.
More bad news for Sainsbury’s CEO Mike Coupe. Days after the Competition and Markets Authority Commission all but vetoed a mega-merger between Sainsbury’s and Asda, new figures show that the decline in sales has accelerated. In the 12 weeks to 24 February sales slid by 1% year-on-year, compared with a 0.3% fall in the three months to late January, according to market research group Kantar Worldpanel. If, as Kantar says, one in ten consumers is stockpiling food, they’re not doing it at Sainsbury’s, says Alistair Osborne in The Times.

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