Fashion brand Ted Baker‘s Canadian division recently obtained protection under the Companies’ Creditors Arrangement Act in Canada and Alvarez & Marsal has been named the monitor.
Court documents indicate that Ted Baker Canada operates 25 retail store locations under the Ted Baker (9), Lucky Brand (7) and Brooks Brothers (9) store banners, with approximately 280 employees. Ted Baker Canada also sells to customers through six retail concession locations in certain Hudson Bay Company stores in Canada.
Bruce Winder, Retail Analyst and Author, said the entrance of the Canadian division of Ted Baker into CCAA represents the current retail climate reckoning across the world.
“Once the U.K. division suspended, suppliers became alarmed and changed payment terms. In addition, the recent acquisition of Lucky Brand and Brooks Brothers strained the business as it implemented a new IT system,” he said.
“With retail softening, the combined entity may have had a hard time paying loans as cash flow could not sustain the business. Sadly, it feels a little like The Body Shop’s story in some ways.”
Doug Stephens, Founder, Retail Prophet, said Ted Baker is yet another example of a brand that found itself middled in a market increasingly dominated by deep, deep discount players at one end and uber-luxury at the other.
“Being a “near-luxury” brand in a market defined by polarized value is a precarious place to be. One also has to wonder if work-from-home and an aging customer set haven’t also played into the brand’s ill fortunes,” he said.
George Minakakis, who leads advisory firm Inception Retail Group, said “show me a brand that can successfully tell and sell its brand story, creating trends instead of chasing them, and I will show you a brand that can survive the test of time.”
“When brands go through creditor protection, the pattern is the same: neglect and overconfidence. Ted Baker is a mid-tier designer brand, and in this world of greater frugality and focus on affordability, it does not come as a surprise that mid-tier brands are struggling,” he said.
“Making a brand relevant and keeping it that way isn’t as simple as attractively displaying the right merchandise or throwing entertainment at it. A brand needs to have a meaningful purpose that resonates with consumers’ lifestyles and values. When Eaton’s and Sears failed, they were no longer department stores of aspirations. They became depots with clothing and cosmetics, and consumers lost their brand connection.
Liza Amlani, Principal and Co-Founder, Retail Strategy Group, said it seems the root cause of the demise of Ted Baker is ABG failing to make payments to suppliers.
“But that can’t be the full story. ABG has a lot of brands under its portfolio so why the delinquency of payments to Ted Baker’s vendors? If vendors aren’t paid and are holding shipments, their own stores would be empty and wholesale accounts would be furious. Something doesn’t add up.”The WSJ quoted: A decline in sales and a technology transition that occurred in the midst of the company’s busiest selling season were also to blame, according to the court filing by Adams and a filing by Alvarez & Marsal, the monitor appointed to oversee the Canadian insolvency. Why risk reputation and retail partner relationships just to close Ted Baker’s doors?
“Last year, Ted Baker expanded their North America merchandising team and leveled up staff to scale the US/Canada business. Hiring merchants would improve product assortments and increase revenues and relevance in the market. In fact, just eight months ago, the NYC team was looking for buyers and planners to join the team.
“If an unsuccessful technology transition was to blame, why didn’t ABG work with OSL, who has a Canadian investment in the brand, to work on these issues? OSL is a technology solution provider. Again, something just doesn’t add up.”
Michael Kehoe, Broker of Record with Fairfield Commercial Real Estate, said the CCAA Protection filing by Ted Baker is representative of the current turmoil in some sectors of the Canadian retail industry.
“Their segment of the apparel category is very competitive on price with several dominant retailers gobbling up market share on the lower end of the category spectrum. I am hopeful that the breathing room provided by the CCAA protection process will give the firm time to save most of the 25 Canadian Ted Baker, Lucky Brand, and Brooks Brothers locations along with 280 jobs that will be affected,” he said.
“The firm shares the struggles of many fashion retailers these days such as supply chain issues, high shopping centre rents and frequent onerous supplier payment terms. The insolvency conversation in the retail industry is an ever frequent one these days as brands come and go in these challenging times.”
“I don’t know if Ted Baker can survive even if it comes out of creditor protection; few of them survive the next phase of recovery. But suppose they want to stay in the game. In that case, they need to tell and sell their brand story as a fashion experience must be part of their recovery—and not another retailer managing financials calling that a recovery plan.”
Since first entering the North American retail fashion clothing industry through an acquisition completed in early 2023, court documents said the brand has struggled and the consolidated business has failed to achieve positive cash flow.
“Over the last year, the business has underperformed relative to budget and revenues have significantly declined, due in management’s view to, among other factors: (i) supply chain disruption and accelerating payment terms following failures by ABG’s (Authentic Brands Group) operating partners in Europe and elsewhere to make payments to suppliers in the lead up to and as a result of the administration process in the UK in respect of that Ted Baker business; (ii) transition to a new technology platform during the busiest selling season, which exacerbated the supply delays; and (iii) generally poor sales performance.
Negative cash flows and working capital issues have caused a strain on the borrowing base, added the court documents.
“These liquidity constraints have resulted in significant arrears owing to critical vendors, including in excess of $2 million owing to ABG as of April 1, 2024 . . . On April 17, 2024, Ted Baker Limited and Ted Baker Canada received Notices of Breach from ABG as a result of the Missed April Payments. Under the terms of the License Agreements, ABG has the right to terminate the License Agreements if the Applicants’ failure to make payments under the License Agreements is not cured within five business days.
“The principal purpose of these CCAA Proceedings is to stabilize and maintain the Ted Baker Group’s business, which urgently requires a stay of proceedings granted under the CCAA and related relief, including access to interim financing required by the Applicants. The Applicants intend to use the breathing room afforded by the CCAA to consider their next steps and restructuring alternatives in consultation with key stakeholders.”
Yet another retailer that fails in Canada while neglecting the Quebec market. Only one Ted Baker store exists in CF Carrefour Laval for the entire province, and the other two brands have no presence at all. Ted Baker’s online presence uses automatic translation for its French version, and it’s very poor (often doesn’t make sense at all even). The signs are clear : retailers that enter Canada without considering its specific context are basically doomed to fail.
I have heard of Ted Baker but have never been to a store or website. Checking it out, I can see why people might not be shopping there. The clothes are British and staid, but not in a good way like some of brands from the U.K. are. The styles remind me of shopping at Sears with my mom in the 1990s, or worse, racks at a thrift store. Most of us have moved on to Uniqlo and COS.