Ted Baker writes recipe for success

When he prepared the company’s interims, FD Lindsay Page would have been looking at the accounting issues affecting the business following its move into the US and Europe.

In last year’s annual results, Page said one of the principal risks to the company arose from exchange and interest rate fluctuations, adding that the board managed and regularly agreed to strategies on these dangers.

‘Where appropriate, the company uses financial instruments to mitigate and manage these risks. All transactions in derivatives, principally forward foreign exchange contracts, are taken solely to manage these risks. No transactions of a speculative nature are entered into,’ according to the report.

He added that Ted Baker’s policy on currency fluctuation was to ‘hedge substantially’ all the risks by using forward contracts, and taking into account forecast foreign cash inflows.

The ACCA-qualified accountant will be interested in discussions at the IAS concerning the financial instruments standard IAS39, as the outcome will affect the company’s hedging policy.

Foreign expansion also had a tax implication on last year’s results.

The tax charge grew from £2.9m to £3m last year. According to Page, the slight increase was caused by the early development of businesses in the US and France’.

But despite these difficult issues, the move overseas has pushed the company ahead of competition and made it into one of the success stories in recent retail history.

At a time when other retailers were struggling, Ted Baker’s New York store expanded, it opened new boutiques in Miami and San Jose and its first store in Paris was a hit.

In a statement made at its agm in June, Ted Baker was optimistic: ‘Trading since the year-end is in line with our expectations.’ Though the end of year results were dependent on trading in the second half of 2003, the company added: ‘The board remains confident of a successful outcome for the end of the year and of the significant growth potential and global appeal of the Ted Baker brand.’

But analysts suspect the company is in better shape than it is admitting to. Evolution Beeson Gregory said: ‘Ted is clearly doing well at present.’

Broker Numis added: ‘There is a lot of talk about a slowdown in the clothing industry. We do not believe this has been the case for Ted Baker.’

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