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Ted Baker starts review after expected inventory error up to £25m

Fashion retailer Ted Baker is undertaking a review of its accountancy operations after it identified the value of inventory held on its balance sheet has been overstated.

Following preliminary analysis, the business warned investors today (2 December) that it might have overstated inventory value by £20 million to £25 million, but believes the accountancy error will have no cash impact and will relate to “prior years”.

Ted Baker’s board has appointed law firm Freshfields Bruckhaus Deringer, and will be appointing independent accountants, to undertake a comprehensive review of the issue. They will report to a sub-committee, chaired by independent director Sharon Baylay. 

The company said all costs and fees associated with completing the independent review will be expensed in the period incurred, and clearly identified as such.

“Ted Baker is committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate,” the retailer said in a statement.

“Whilst the review is ongoing, the company will not comment further.”

The apparent inventory miscalculation comes after Ted Baker founder and former CEO, Ray Kelvin, resigned earlier this year, following allegations of misconduct, which preceded a period of turbulent trading at the retailer.

Half-year sales at the group – for the 28 weeks to 10 August – fell 2.5% to £303.8 million, as the company reported a loss of £23 million compared to a £24.5 million profit one year before.

Even eCommerce sales – which have been a strong driver of growth at Ted Baker in recent years – dropped by 2.5% to £214.5 million.

Meanwhile, Ted Baker named former Debenhams CFO, Rachel Osborne, as its new finance boss last month. She replaced Charles Anderson, who left the company after 17 years to take on a similar role at luxury brand, Mulberry.

Ted Baker is scheduled to announce a trading update for the 17-week period from 11 August to 7 December 2019 on Wednesday 11 December.