Ted Baker appoints Deloitte to probe multi-million stock overstatement

10 January 2020 Consultancy.uk

Troubled fashion retailer Ted Baker has drafted in investigators from Deloitte to probe an accounting mishap that saw it overstate the value of its stock by up to £25 million. Deloitte’s probe will run separately from a root-and-branch review of Ted Baker’s operations already being undertaken by fellow consultancy AlixPartners.

Founded in 1988 in Glasgow, Ted Baker has since grown into a nationwide luxury clothing retail company. Ted Baker has a number of stand-alone stores in the UK, and has expanded its high street presence through its wholesale business which includes Australia, New Zealand, the United States, Canada, Norway, Greece, Spain, the Netherlands, Belgium. The last two years have been difficult for the company, however.

In late 2018, an online petition started by a former employee alleged that Ray Kelvin – the company’s founder and then Chief Executive – had hugged employees inappropriately. Kelvin announced a voluntary leave of absence to address the claims, before announcing his resignation from the company in March 2019. Throughout 2019, the retailer was forced to issue three profit warnings and later that year, Lindsay Page, who acted as Chief Executive in Kelvin’s absence, left the company along with Executive Chair David Bernstein following poor trading figures.

Ted Baker appoints Deloitte to probe multi-million stock overstatement

Rachel Osborne was appointed acting CEO in December – and wasted no time in acting to turn the company around. Consultancy AlixPartners was appointed by Ted Baker to support a root-and-branch review of its operations. AlixPartners is now working to establish a turnaround strategy, with a wider-ranging mandate to look at Ted Baker’s customer strategy, costs, supply chain and operations across departments.

Shortly after that appointment, however, it also emerged that Deloitte had been hired by Ted Baker. This time, it related to an accounting blunder which led to the fashion retailer overstating the value of its stock by £20-25 million. According to a report from Sky News, Deloitte will work with legal firm Freshfields Bruckhaus Deringer on the accounting inquiry, after which both firms will report back to a board sub-committee that is chaired by independent director Sharon Baylay.

According to a statement from Ted Baker, the valuation was based on preliminary analysis and any adjustment “will have no cash impact and will relate to prior years.” Despite this, the probe will likely unnerve the auditing wing of KPMG, which has been Ted Baker’s accountant since 2002.

The probe will come after a difficult year for the Big Four firm, during which KPMG was fined £3 million by the Financial Reporting Council for breaching the watchdog's ethical standards in relation to non-audit services provided to the fashion retailer – a conflict of interest that the firm said in 2018 it would seek to stamp out in future.


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