Shareholders of Ted Baker plc (LON: TED) have seen their shares crash following announcements of a £25 million balance sheet error.
Ted Baker plc is a British luxury clothing retail company, and is a stable name on the British high street.
Shares in Ted Baker crashed 9.12% to 361p after the announcement. 2/12/19 11:18BST.
In the retail and clothing sector, rivals such as Superdry and Sosandar have seen their shares slip in similar fashion following modest updates.
The firm warned investors that it will take a £25 million hate, after it overstated the value of inventory on its balance sheet.
The retailer has appointed Freshfields Druckhaus Deringer to investigate the issue and told shareholders that it estimates an impact on the value of the stock of between £20 million and £25 million.
The interim period has not been pleasant for Ted Baker, as the firm reported a half year loss at the start of October.
The Magic Circle law firm will appoint independent accountants to undertake a “comprehensive review” of the issue, Ted Baker said.
“Ted Baker is committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate,” Ted Baker said in a statement.
“Whilst the review is ongoing, the company will not comment further.”
Liberum called the discovery “less than ideal”.
“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,” the broker said.
“The board believes that any adjustment to inventory value will have no impact on the year-end cash balance and will relate to prior years. We keep our recommendation under review as there are further moving parts that may need consideration, which naturally lead to some additional questions.”
This issue will not come at a pleasant time for newly appointed Rachel Osnorne, who was appointed finance head just a few weeks back.
The issue was mentioned in Ted Baker’s last annual report from information provided by auditors KPMG.
AJ Bell’s investment director Russ Mould said it appeared that “Ted Baker has found another banana to slip up on”.
“Discovering that the value of inventory on its balance sheet has been overstated is a huge blunder on its behalf,” he said.
“It suggests that the business hasn’t got a grip on its numbers which is a bit worrying considering that new chief executive Lindsay Page used to be the finance director.
“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.”
The company is due to publish its latest trading next week.
