FTSE250 Retailer, Ted Baker, posted a set of positive interim figures earlier this week with group revenue rising 14%, with pretax profit up 12.7% to £24.2m
Despite difficult trading conditions in the US which, the group attributes to higher levels of competitor promotional activity and lower international tourism, led to reduced growth in sales from 28.7pc in 2016 to 18.8pc this year.
With bricks and mortar retailers flagging, Ted Baker has been carefully expanding it’s physical stores over the period with one in London, Paris, Houston and Los Angeles and further concessions within premium department stores across the UK, France, Germany and the Netherlands.
Plans are in place to open new stores in Oxford and London Luton Airport and additional concessions are due for launch in the UK, Germany, Spain, Canada and the US later this year.
Against this positive backdrop, the group has declared an interim dividend of 16.6p, up from 14.8p in 2016 which represents an increase of 12.2%.
Ray Kelvin CBE, Founder and Chief Executive of Ted Baker, said:
“We have a clear strategy for the development of the brand across both established and newer markets and this remains underpinned by the focus on design, quality and attention to detail that is at the core of everything we do.”
“We are dedicated to the long-term development of the Ted Baker brand and are continuing to invest in our infrastructure and people to support our future growth. Whilst trading conditions in some of our markets remain challenging, we are confident of making further progress for the full year, in line with our expectations.”
So, how does Ted Baker stack up as a long term investment opportunity? Let’s take a look at the fundamentals.
Ted Baker fundamentals
The group has seen steady and consistent growth in both revenue and pretax profits over the last five years, reflecting the Boards careful strategy of finding strategic positions for new stores, rather than rolling out as many as possible.
Their double-digit growth of annual dividends over the last five years is expected to continue for the full year with an increase to 58.8p per share, up from 49.4p last year, representing a prospective yield of 2.14%.
Shortly after the announcement of the group’s interim report, broker, Jefferies International reaffirmed their BUY rating for Ted Baker, raising its price target to 3100p from 2900p.
The consensus from Ted Baker’s set of reporting brokers is a BUY recommendation, while pretax estimations for 2017, and more importantly, 2018 suggest the group is set to continue its positive trend.
The group has stated that it is in line to meet full-year expectations this year, which should be around the £74.5m mark, up from £63.3m in 2016. However, the broker consensus suggests that 2018 will see that growth extended to £84.8m.
Dividend growth for 2018 is expected to maintain its double digit growth with a forecast yield of 2.5% while the attractive forward P/E Ratio of 19.9x means there’s plenty of room for growth within the group’s current trajectory.
The share price has enjoyed strong gains over the last 3 months, having endured a difficult period earlier in the year. However, long term performance has seen the stock grow by 189% in the last five years.
So what does this mean for Ted Baker?
The fundamentals back up the Board’s strategic growth plan. Successive years of pretax profit growth and increased dividend yields will appease shareholders while future projections suggest that there is still value left in the share price at current levels.
Our thanks as always to JD Financial Publishing for providing access to the Company REFS research tool. They are currently offering a 30-day free trial to this fantastic product and we would urge you take a look.
Do bear in mind this isn’t a recommendation to buy this stock. The above constitutes the authors opinion based on the research undertaken. We urge you to do your own research before you invest.