Ted Baker starts review after expected inventory error up to £25m

Ted Baker may have overstated inventory by 25 million pounds

Ted Baker may have overstated inventory by 25 million pounds

The value of inventory held on the company's balance sheet has been overstated by £20-25mln, the FTSE 250 group said out of the blue on Monday, roughly 10% of the total amount.

The move comes as new finance chief Rachel Osborne, who joined from Debenhams in October, tries to get to grips with the company's accounts.

The accounting oversight is the latest troublesome issue to clobber the quirky fashion and accessories retailer, a one-time retail sector darling whose growth story has unraveled following a string of profit warnings.

Ted Baker has had a torrid year after former and current staff accused its founder Ray Kelvin of a regime of "forced hugs" and harassment.

"It is clearly going to be an uncomfortable time for the business, unfortunately just at the point when it needs to be focused on Christmas sales and trying to make up for disappointing trading earlier this year".

The company, which brought in Lindsay Page as chief executive officer this year following the departure of Ray Kelvin after misconduct allegations, said it expects no cash impact from adjustments to the inventory value that related to prior years.

Ted Baker said Freshfields Bruckhaus Deringer will undertake a comprehensive review of the issue, reporting back to independent director Sharon Baylay, a marketing executive who joined the board of Ted Baker previous year. Ted Baker also warned full year profits would disappoint if headwinds persisted, citing "unprecedented" levels of competitor discounting.

In October, Page said the company had likely faced the most hard trading conditions that he could recall in 30 years after issuing its second profit alert in four months. "Whilst the review is ongoing, the company will not comment further", the company said.

'We keep our recommendation under review as there are further moving parts that may need consideration, which naturally lead to some additional questions'.

Kelvin took a voluntary leave of absence from his role as chief executive of Ted Baker in December a year ago, after he was accused by the company's staff of forced "hugging" and inappropriate touching and comments.

Inventories can be hard to calculate accurately, because they depend on the value of the goods being sold, among other valuations.

Auditors uncovered mis-statements but said they were too small to affect the financial statements.

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