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Ted Baker boss to stay on as law firm starts 'forced hugging' inquiry Ted Baker boss to stay on as law firm starts 'forced hugging' inquiry
(about 5 hours later)
Ted Baker boss Ray Kelvin will continue to work in the business during an investigation into allegations that the fashion retailer’s founder and chief executive forced hugs and kisses on employees. The fashion chain Ted Baker has insisted it is “business as usual” and its boss Ray Kelvin will continue in his job, despite calling in lawyers to investigate allegations that Kelvin forced hugs and kisses on employees.
Lindsay Page, chief operating officer, said it was “business as usual” at the company as he announced disappointing trading over the last three months, including a 3% fall in sales at established stores. The company confirmed it had appointed the law firm Herbert Smith Freehills to conduct an independent external investigation into the allegations. Lindsay Page, the firm’s chief operating officer, said no timetable had been set for the lawyers to report back.
The company confirmed it has appointed the law firm Herbert Smith Freehills to conduct an independent external investigation into the allegations. Page said there was no set timetable on when it would report back . Page was speaking as the firm, which was founded by Kelvin 30 years ago and has more than 500 outlets worldwide, announced disappointing trading over the last three months, including a 3% fall in sales at established stores.
“It’s an independent investigation,” he said, indicating that Herbert Smith would be given as much time as required. .“It’s an independent investigation,” said Page, indicating that Herbert Smith would be given as much time as required.
The firm will report to a committee of the non-executive directors that will be chaired by Sharon Baylay, a former BBC Worldwide and Microsoft executive who joined Ted Baker’s board this summer. I worked for Ray Kelvin at Ted Baker. I wish I’d stood up to him | Erica Roffe
The company’s share price has fallen by more than a fifth since Sunday, when the Observer published the allegations, which include “forced hugging”, making “sexual innuendos” and “stroking people’s necks”. The firm would report to a committee of the non-executive directors that would be chaired by Sharon Baylay, a former BBC Worldwide and Microsoft executive who joined Ted Baker’s board this summer.
On Thursday, shares recovered slightly, rising just over 4% despite house broker Liberum cutting its annual profit forecasts for Ted Baker by just over 3% to £74.3m as it anticipated lower sales growth. The company’s share price has fallen sharply since Sunday, when the Observer published the allegations, which included “forced hugging”, making “sexual innuendos” and “stroking people’s necks”.
The share price rose on relief that trading had not been worse for Ted Baker during a period of unseasonably warm weather which has affected fashion retailers across the high street. Some key distributors, particularly House of Fraser and Debenhams, encountered serious difficulties. The decline has wiped £116m off the value of the company and cut the value of Kelvin’s 35% stake by more than £40m to £244m.
“Ted’s positioning as a global lifestyle brand leaves it far better placed than most in the more challenging environment that currently persists,” Liberum said. More than 300 former and current Ted Baker staff have now signed a petition objecting to the culture of “forced hugs” which they claimed was harassment.
In a trading update, Ted Baker reported a 0.2% fall in revenues at constant currencies for the 16 weeks to 1 December, its third quarter. Wholesale sales fell 6.5% as expected due to the timing of deliveries, which was largely offset by a better retail sales performance, up 2.3% as it opened 5.2% increase more space. Online sales surged 18%. Organise, the online campaigning platform which started the petition, said it had delivered more than 100 anonymised “reports of harassment” to the company’s board of directors.
Page said trading had improved in the last eight weeks as cold weather had kicked in, helping to lift sales of coats and knitwear, which had been subdued during the warmer than usual September and early October across the UK, Europe and the US east Coast. The petition also accused Kelvin, 63, of “stroking people’s necks” and making “sexual innuendos”.
In the last eight weeks of the period, retail sales climbed 4% as the weather became more typical for the season. The difficult autumn came after the summer heatwave also hit sales and profits, forcing Ted Baker to discount clothes to pull in shoppers. When the existence of the petition was first revealed the company said “Ray greets many people he meets with a hug – be it a shareholder, investor, supplier, partner, customer or colleague.” It said the hugs were part of Ted Baker’s “culture” but “absolutely not insisted upon.”
Tom Stevenson, an investment director at Fidelity Personal Investing’s share dealing service, said: “It’s not the health of the sales performance that’s driving Ted Baker’s shares at the moment, of course, but rather the ongoing investigation into the alleged inappropriate behaviour of the company’s founder and driving force, Ray Kelvin. Kelvin built the company from a single shirt shop in Glasgow and it now describes itself as a “global lifestyle brand.” However, the chief executive keeps a low profile, and has never been photographed without an object – such as a hat, shoe or ornament – partially covering his face.
“The shares have fallen so far so fast because investors fear that without Kelvin the company will be less able to counter the headwinds blowing through the beleaguered high street.” On Thursday, shares recovered slightly, rising just over 4% on relief that trading had not been worse for Ted Baker during a period of unseasonably warm weather and tough trading conditions which has affected fashion retailers across the high street.
Ted Baker warned of tough trading conditions in the UK, exacerbated by the recent collapse of House of Fraser. More than 1,000 suppliers were left out of pocket when the department store chain went bust in August. Ted Baker, which runs 30 concessions in the department store chain, was owed £600,000. House of Fraser was immediately bought out of administration by Mike Ashley’s Sports Direct. Department stores are key outlets for Ted Baker products and there were fears sales would have been hit harder by the collapse and subsequent sale of House of Fraser and continuing problems at Debenhams. Ted Baker was owed £600,000 when House of Fraser went into administration.
Page said Ted Baker was “watching things carefully” at House of Fraser and would “see how things develop” before making a decision about its long-term future with the department store. Tom Stevenson, an investment director at Fidelity Personal Investing’s share dealing service, said Ted Baker was a “rare retail success story”, but he added: “Trading is not exactly front of mind for Ted Baker’s shareholders, but rather the ongoing investigation into the alleged inappropriate behaviour of the company’s founder and driving force, Ray Kelvin.”
He said: “Ted Baker illustrates the risks of investing in companies that are so closely associated with one person, however talented, especially when they own a third of the company. The shares have fallen so far so fast because investors fear that without Kelvin the company will be less able to counter the headwinds blowing through the beleaguered high street.”
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