Ted Baker's shares have been hit by complaints about the conduct of its founder, CEO and biggest shareholder, Ray Kelvin.
The group says it has launched an independent investigation into the claims.
Sales are rising, but that's really a function of online growth and new space. Sales per square foot are firmly in negative territory, and trends are weaker in the wholesale and retail divisions.
Add in the awkward accusations around the CEO's conduct, and it doesn't make for a pretty picture.
As a consequence, Ted Baker shares had fallen from 30 times expected earnings in 2015 to around 10 times today. That's a rating we've not seen since back in the financial crisis.
Ted's historically commanded a more lofty rating because of its successful transition from Glaswegian shirt shop to quirky global lifestyle brand. Its ethos is to present something a little different to the mainstream, an affordable luxury for consumers seeking individuality and indulgence. That's an attractive niche in the market.
Almost uniquely for a young fashion brand, the group doesn't do above-the-line advertising. Instead, it aims for a product that will sell itself, with marketing savings invested back into the design. Branding on the garments themselves is typically on the light side - which should help Ted avoid the boom and bust cycle brands like Superdry and Abercrombie & Fitch have endured.
To date, expansion has been tailored nicely, with the focus on choosing the right locations rather than just rolling out as many stores as possible. Meanwhile, the online operation has delivered impressive growth.
All this has helped Ted build an enviable record of dividend increases. Weakness in the share price has pushed the prospective yield up to 4.6% next year, and analysts are confident the group can continue increasing the dividend in the short-term. We share that optimism, although of course there are no guarantees - especially amid these uncertain times.
Trading details (4 October 2018, at constant exchange rates)
Half year revenue rose 5.5% at constant exchange rates to £306m, with Retail, Wholesale and Licencing sales all rising. The interim dividend increased 7.8% to 17.9p per share.
However, the shares fell 9% on the morning of the news.
Challenging conditions and unseasonal weather mean the rate of growth isn't as fast as in the past. This, together with higher costs, and a £0.6m write-off courtesy of House of Fraser, meant pre-tax profit fell 3.2% to £24.5m. The group says the second half "will remain challenging due to external factors".
Retail, the group's largest division, saw sales rise 2.9% to £220.1m. Growth was driven by online sales, which rose 25.7% to £53m. Sales space rose 5.5%, including new openings in London Bridge, Lyon and two in Germany, but in-store sales densities dropped 7.8% to £396 per sq.ft.
Wholesale sales rose 12.8% to £85.9m. This result benefited from the timing of sales, and a strong underlying performance from the UK and North American businesses. Looking ahead, the group expects to report mid to high single-digit percentage growth for the full year.
Licence income rose 11.7% to £10.9m, boosted by several agreements in Asia.
The cost of opening and refurbishing stores, concessions and outlets contributed to capital expenditure of £18.7m, slightly behind the first half of last year. An increase in stock on hand was behind a 20% increase in working capital, which rose to £188.2m.
Looking ahead, the group says its Autumn / Winter collections have been well received, and while conditions look to remain difficult in the near term, it remains confident in the brand's long term development.
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