The suffering British retailer has appointed a law firm to carry out a substantial investigation after it overestimated the value of its stock.
The company has recently appointed a new finance director who, after initial inspection, believes that the value of the balance sheet´s inventory has been overstated by £20m to £25m.
The mistake won´t affect this year´s economic situation as it relates to previous years, however, the luxury clothing business has hired London law firm Freshfields Bruckhaus Deringer to look into the matter further.
Independent accountants will also be brought in as part of a new subcommittee within the company that will be chaired by director, Sharon Baylay.
Ted Baker´s shares dropped by 15 per cent at first, but this figure was later cut to 8.5 per cent at 363.82p, whereas a year ago they were being exchanged for £15.50.
The high-end retailer has suffered throughout the year, one of the most recent scandals being that former and current staff accused its founder Ray Kelvin of “forced hugs” and harassment.
In March, he stood down as chief executive and was replaced by Lindsay Page. The company´s profits were hit by the £2m cost of an investigation and legal matters relating to the allegations.
This year, the business released three profit warnings and announced a first-half loss of £23m in October; this was its first in over 20 years. Reasons given for the loss included an unseasonably warm September which affected winter sales, combined with large discounts in competitor stores that forced cost-cutting. Ted Baker also admitted to mistakes within its women´s fashion ranges.
A trading update will be released on 11 December which investors hope will shed some more light on the situation of the inventory mishap.
Half-year sales at the group – for the 28 weeks to 10 August – fell 2.5% to £303.8 million, as the company reported a loss of £23 million compared to a £24.5 million profit one year before. Even eCommerce sales – which have been a strong driver of growth at Ted Baker in recent years – dropped by 2.5% to £214.5 million.