Ted Baker outlines 'hugging' probe as revenue falls

December 06, 2018

Ted Baker has appointed a law firm to carry out an independent investigation into allegations of "forced hugs" against its boss.

The fashion chain said Herbert Smith Freehills would conduct the inquiry, which would report to a committee of its non-executive directors led by Sharon Baylay.

The harassment allegations made against chief executive Ray Kelvin also include asking young female staff to sit on his knee, cuddle him or let him massage their ears.

The embattled company's share price has fallen by a quarter since the claims emerged at the weekend in an online petition, claiming to be backed by more than 200 current or former employees, which called on the company to end "a culture that leaves harassment unchallenged".

Ted Baker announced details of its inquiry while giving a scheduled trading update for the 16 weeks to 1 December, which showed a fall in overall sales.

It said a 6.5% drop in wholesale division revenue, a consequence of unseasonably warm weather, was largely offset by a 2.3% increase in retail sales - thanks to online - despite challenges posed by the collapse of House of Fraser.

Total revenue slipped by 0.2%, it reported. The trading statement described the figures as a "resilient performance".

Shares - down over 40% in the year to date - gained back some ground in early trading following the update - rising more than 4% as the company maintained its guidance.

Commenting on the sales figures Mr Kelvin said: "We are pleased with the brand's continued expansion, which is a reflection of the strength of the Ted Baker brand and the design and quality of our collections.

"The investment in our flexible business model ensures that the Ted customer has multiple channels to engage with the brand and underpins our long term development.

"Our global e-commerce business continues to grow well and is complemented by our digital marketing strategy and unique stores that showcase the brand."

George Salmon, equity analyst at Hargreaves Lansdown, commented: "Even before the accusations around the conduct of Ray Kelvin emerged, Ted was facing a cocktail of challenges.

"UK department stores, a key sales outlet for Ted, are under pressure, while conditions aren't much better across markets in the rest of the world.

"The timing of the claims is disrupting the all-important Christmas season, but the potential impact stretches beyond these next few weeks.

"The scandal engulfing Mr Kelvin damages the Ted brand, and raises questions over the future leadership of the business, which has hitherto delivered consistent profit and dividend growth.

"That makes the findings of the independent investigation crucial."

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