Ted Baker calls in law firm to investigate £25m inventory inflation

Marco Green
December 2, 2019

Fashion retailer Ted Baker has said it may have overstated the value of its stock by between £20m and £25m.

Analysts suggested the move is the first significant step taken by new finance chief Rachel Osborne, who joined from Debenhams in October, to get to grips with the company's accounts. In October, the retailer reported a £23m loss for the six months to 10 August, down from a £24.5m profit previous year.

Ted Baker has had a torrid year after former and current staff accused its founder Ray Kelvin of a regime of "forced hugs" and harassment.

Shares in the company, which were booted out of Britain's mid-cap index earlier this year, tumbled 15%, extending a 74% plunge so far in 2019 and heading for their steepest yearly fall on record.

He added: "Appointing a law firm and the intention to bring in independent accountants will raise questions about whether more serious problems are bubbling under the surface at the business".

However, the board was at pains to point out that "any adjustment to inventory value will have no cash impact and will relate to prior years".

It has appointed independent law firm Freshfields Bruckhaus Deringer and will also be appointing independent accountants to undertake a comprehensive review of the issue. For an average listed business, this would be a bump in the road, but for Ted Baker, it's the latest in a line of a series of setbacks.

Liberum Capital said: 'Today's latest news from Ted Baker, regarding the overstatement of last year's inventory value, is less than ideal. "Whilst the review is ongoing, the company will not comment further".

Kelvin took a voluntary leave of absence from his role as chief executive of Ted Baker in December past year, after he was accused by the company's staff of forced "hugging" and inappropriate touching and comments.

"In our view, it is indicative to some degree of the very early-stage work that the new and highly regarded CFO, Rachel Osborne, is undertaking".

Auditors at KPMG had already raised the issue of overstating the company's assets in its last annual report. If you click on them we may earn a small commission.

Inventories can be hard to calculate accurately, because they depend on the value of the goods being sold, among other valuations.

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