Ted Baker Fashion Industry

1300 Words3 Pages

Introduction
With the increasingly rapid competition in fashion industry, investment project brings wider effects on the future development of a business (Spencer, n.d.). The aim of the report is to analyse Ted Baker Plc (Ted), a company in fashion industry, and to provide Mr D.G. Farmer with investment recommendations. To achieve this objective, initially the overview of the fashion industry and Ted Baker Plc will be provided. Subsequently, the report will appraise the financial performance of the company in terms of ratios. The conclusion and suggestions, then, will be offered. Finally, the limitations of this report and bibliography will be presented.

Fashion Industry
Fashion industry comprises of businesses designing and selling clothing, shoes and accessories (Spencer, n.d.). Traditionally, retailers work as intermediaries to purchase huge numbers of goods from wholesalers, and then sell them to customers. Currently many fashion companies undertake both types of operations (ibid).

Many features differentiated fashion industry with others. One could be high speed production (Fletcher, 2012). Due to seasonally changes in the industry, the demand of suitable clothing is urgent (ibid). This forced manufacturers to improve efficiency of manufacturing process. Then, fashion industry can be fragmented and highly competitive (ibid). There are not only main players in the market, but also many private companies and ‘niche stores’ that only produce specific type of goods or service target consumers (ibid). Thus competition is intensified. Also, the industry could be economically sensitive (Spencer, n.d.). If the economy is booming, people may purchase more fashion products; however, during economic recession, this type of goods coul...

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...ms due to low coverage of current liabilities and some difficulties in managing stock. It also could be risky for shareholders because of the chain reaction of decreasing ability to cover interest payments. Therefore, from the numerical point of view we recommend that risk takers should hold the shares for potential profits but risk avoiders probably should sell them due to possible problems in liquidity and management.

Limitations
This report appraised Ted Baker plc based on ratio analysis that could be influenced by the quality of the financial statements. In calculations, it assumed that all sales and cost of sales were in credit and most ratios were approximate. Also, the analysis periods and benchmarks were limited. To further evaluate, it is necessary to consider the industry state and to acquire more information about the operating strategies of the company.

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