The company which has a trading update due on 11 December is speculated to have known about the inventory blunder long before the records became public.
Ted Baker employees tried to alert the luxury clothing brand about the mishandled inventory information as early as May 2018, per multiple employees working in their London headquarters.
This chimes with the appointment of Freshfields Bruckhaus Deringer, the law firm appointed by the company to look into this miscalculation of inventory value – which also suggested Ted Baker knew of concerns about the problematic data earlier than it had publicly said. The operations team under new chief executive Lindsay Page is struggling to come up with a turnaround plan and the £20 – £25 million hit is making it difficult for investors to believe that they even have one.
Amid a whirl of trending headlines for the company today, including a disappoint for KPMG, the popular accounting firm has audited the records of Ted Baker since 2000. “It’s almost irresponsible for a brand so big to ignore major irregularities in their records. Almost everyone familiar with the inventory database knew something was off, financial advisers would often highlight suspicious data records but nobody really looked into it,” said Amber, a finance studies intern who was working at the records department from December 2018 to January 2019.
The unfortunate tidbit was announced by Ted Baker to inform their investors of this incident and has reportedly refused to comment on the current ongoing of review. According to the Financial Times, they said the investigation would be conducted “in an efficient and transparent manner.”
Commenting on their knowledge of this situation, an accounting supervisor responded in a furious tone: “We already knew this was going on. We also knew that soon, this information would become public and our market reputation will decline.”
Asked about the details of this balance sheet error, a Ted Baker spokesperson pointed me to their press department which refused to answer any questions related to previous knowledge of this incident. The staffers were also aware of the poor regulations surrounding the “challenging trading” conditions in 2018, despite which they managed to get their profits up by 3.5 per cent. Fast forward to 2019, and the news reports revealing the intent and scale of this overvaluation blew up into a global financial scandal for Ted Baker, wiping billions off its stocks.
Annual Results Announcement for the 52 weeks ended 26 January 2019 by Ted Baker PLC
Despite 15+ employees being aware of the inventory data error and violation of ethics – by the beginning of the fiscal year in 2019 at the latest – company leaders had put no media structure in place for them to regulate this information to the investors and public.
Note: Ted Baker didn’t immediately responded to the press inquiry regarding this news. Names have been changed in this report for legal reasons.