Ted Baker margins hit by competition

Designer brand Ted Baker today lowered profits guidance after feeling the heat from a cut-throat Christmas for fashion retailers.

The company said gross margins were 2.5 per cent below those achieved a year earlier after it required a greater level of promotional activity to compete in the current tougher conditions.

It expects profits for the year to 31 January to be at the lower end of market expectations, currently between £19m and £23m.

Seymour Pierce stockbrokers said it downgraded its 2008/9 pre-tax profit forecast from £21.5m to £19m following today's update.

Analyst Freddie George said Ted Baker's 7.2 per cent increase in retail sales for the period between 1 November and 24 December was also below the broker's hopes for a figure in the region of 8 per cent.

He also downgraded 2009/10 forecasts amid concerns about the strength of demand from high spending urban shoppers.

Mr George said: "We also believe that competition is intensifying and certain of the mid range retailers are now trying to replicate the successful Ted Baker ranges."

Ted Baker said it made a strong start to the post Christmas sales period and that it expected to start the new season with a clean stock position.

Founder and chief executive Ray Kelvin said the company's festive trading represented a "creditable performance in a very challenging market".

He added: "We expect 2009 to be challenging year but believe that we are well placed to deal with the difficult trading environment.

"Our brand remains strong with a loyal customer base and our financial strength will allow us to continue to invest in the development of the Ted Baker brand worldwide and to take advantage of opportunities that may arise."

The UK business trades from 33 stores, nearly 100 concessions and ten outlet stores. It recently opened stores at new shopping centres in Bristol and Liverpool and White City, London.