The Daily Telegraph’s Questor share tipping column describes shares in Ted Baker PLC (LSE:TED) as having fallen ‘violently out of fashion’ amid a meltdown of confidence in the financial and operational stewardship of the business.
Without scratching at old sores, previous missteps drove a business once worth over GBP1bn to around 10% of that valuation at the nadir. And of course, it has had a global pandemic to deal with too.
So, does Tuesday’s update represent a turning point for Ted (as the City types like to refer to it)?
Of sorts, yes. A second-quarter rise in sales of 50% might look good, but it comes against some very weak comparators. Remember at the same time last year we were still very much in the grip of the Covid outbreak.
Still, profit margins were up five percentage points, and the company’s transformation strategy is back on track.
It is also well capitalised with access to around GBP106mln of liquidity (cash and debt).
“The current valuation does not reflect the strategic and operational overhaul being implemented, which is re-igniting the brand and product offer, revamping marketing and creating a leaner, more capital-light business model fit for the future,” said Liberum earlier Tuesday.
It also restated its ‘buy’ recommendation and a price target of 225p.
Changing hands for 170p, valuing the business at GBP313mln, the stock looks cheap if you agree the broker’s target price is realistic.
But be warned: Nobody is predicting a return to the halcyon days when Ted’s shares were worth over GBP25 each.
And while the modest price-to-earnings multiple might be tempting, shopping around may yield other bargains in the bombed-out retail sector.
“We prefer other recovery stocks, such as Superdry, but see nothing to cause concern in today’s Ted update, with progress on track,” said Peel Hunt.