Fashion retailer Ted Baker has announced an independent review of inventory has revealed its value was overstated by £58m.
Ted Baker said the figure was up on an assessment at the end of 2019, which found inventory was overstated by £20-25m.
The overstatements relate to results from January 2019, when the inventory was valued at £225.8m, up on £187.2m in 2018.
The firm referred to risk with inventory value in its 2019 annual report. “Sales in the fashion industry can be extremely volatile with consumer demand changing significantly based on current trends. As a result, there is a risk that the carrying value of inventory exceeds its net realisable value,” the report said.
Ted Baker announced in December 2019 that Deloitte would be appointed to “undertake a comprehensive review of its stock inventory position”.
“The Deloitte review has now largely concluded and Ted Baker expects to report that the value of inventory held on the group’s balance sheet at 26 January 2019 was overstated by £58m,” said the firm.
“This is materially higher than the £20-25m preliminary assessment announced on 2 December 2019. As previously stated, the overstatement is a non-cash item and related to prior years.”
In a trading update in December 2019, Ted Baker said it expected profits before tax for the year ending 25 January 2020 to be £5m-10m, compared to profits of £50.9m in the year to January 2019. Revenues for the 17 weeks to 7 December 2019 were £203.8m, down 0.3% on the same period in 2018.
In March 2019 former chief executive and founder Ray Kelvin stepped down over harassment claims and a culture of “forced hugging”.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.