Ted Baker feels ‘hug-gate’ squeeze as brokers divide

The City was split over Ted Baker’s prospects on Wednesday after “hug-gate” caused the fashion brand’s value to fall by £198 million in three days.

Analysts at HSBC downgraded the stock to Hold from Buy saying “uncertainty over leadership distracts from the core investment case” and there was “limited visibility as to when this will be resolved”. This means that instead of seven Buys and one Hold it now has six Buys and two Holds. No one yet rates it a Sell.

Founder and chief executive Ray Kelvin has been accused of inappropriate behaviour to staff and there are fears he might have to step down. Ted Baker has commissioned an external investigation.

But Liberum reiterated its commitment to the stock: “We believe the impact on the group’s brand strength and longer-term growth prospects is likely to be minimal.”

The allegations have hit the business hard — including Kelvin’s 35% stake — with its shares price falling to a five-year low yesterday. They rose 26p to 1446.7p today. It will update on trading on Thursday.