Ted Baker shares have fallen sharply after it alerted investors to a blunder related to the value of the stock of goods on its balance sheet.
The fashion brand, which has issued a couple of profit warnings this year amid tough trading, said preliminary analysis showed a hit of between £20m-£25m.
However, it believed the overstatement related to earlier years and would have no cash impact.
“The board has appointed Freshfields Bruckhaus Deringer LLP, and will be appointing independent accountants, to undertake a comprehensive review of this issue, and they will report to a sub-committee, chaired by independent director Sharon Baylay,” the company said in its statement.
It added: “All costs and fees associated with completing the independent review will be expensed in the period incurred and clearly identified as such.”
Ted Baker, which is due to update the market on trading in the run-up to the crucial Christmas season next week, has been battling to deliver a turnaround plan under new chief executive Lindsay Page.
He took over in April following the resignation of founder Ray Kelvin amid allegations of inappropriate behaviour, including “forced hugs”.
Mr Kelvin denied the claims.
The shake-up in executive roles continued last month when Rachel Osborne joined as chief financial officer from Debenhams.
Ted Baker released its latest profit alert in June, saying it expected earnings for the year to the end of January to be between £50m and £60m.
It blamed weak consumer confidence and highly promotional markets in a number of its key trading territories, including the UK.
Half-year results reported to the market in October showed it had slumped to a loss on both a statutory and underlying basis.
Shares had lost almost three quarters of their market value in the year to date ahead of Monday’s open, to give the firm a capitalisation of £177m.
They fell 12% in early deals.
Analysts from Liberum said of the stock development: “Today’s latest news from Ted Baker, regarding the overstatement of last year’s inventory value, is less than ideal.
“In our view, it is indicative to some degree of the very early stage work that the new and highly regarded CFO, Rachel Osborne, is undertaking.”