British fashion chain Ted Baker posted a smaller annual loss and pointed to robust sales in the coming months as demand for office and leisure wear rebounds following a gradual return to pre-pandemic lifestyles.

The takeover target has picked a preferred suitor to take forward its sale process after a flurry of revised proposals from interested parties.

Ted Baker's underlying pretax loss for the 52 weeks ended January 29 stood at £38.4m compared with a loss of £59.2m a year ago, with sales in the first quarter of the current year rising 20% year-over-year.

Known for its suits, shirts and dresses with quirky details, Ted Baker is in the middle of a turnaround plan focusing on cost cuts and boosting its online presence and product range.

It has nearly 400 stores, mostly in Europe, North America and Britain.

The fashion chain said it was cautious about soaring inflation, which is forcing consumers to cut back on spending.

Rival ASOS has warned the cost-of-living crisis will hurt its second half, while Next has flagged concerns of a hit to clothing and homeware sales.

"Strong sales momentum has continued into the new year, supported by a steady return to the office and social events," said Ted Baker's chief executive Rachel Osborne.

"While we remain mindful of what is a challenging macro environment, we are well positioned for growth," she added.

Earlier in the day, Ted Baker said its results would be delayed because it was completing its audit.

Ted Baker also said it had stopped wholesale shipments to Russia after the Ukraine invasion. Russia, along with Ukraine and Belarus, previously accounted for under £1m of annual sales.