The group said heavy discounting across the high street, consumer uncertainty and a poorly received spring/summer collection had contributed to the fall.
Losses for the six months to 11 August totalled £23 million, compared with the £24.5m pre-tax profit reported a year earlier. The slump was also due, in part, to major investment at the firm’s Asian businesses.
Sales slipped 0.7 per cent to £303.8m and the firm is likely to struggle in the second half of the year if market conditions do not improve.
The fashion label also suffered from the troubles of Debenhams and House of Fraser in the UK and Nordstrom and Bloomingdale’s in the US – department stores where Ted Baker had a significant presence. It took a hit of £600,000 from the collapse of House of Fraser alone.
Ted Baker was founded as a single shirt shop in Glasgow in the late 1980s and has grown into a global fashion empire.
Chairman David Bernstein told investors: "Trading conditions have been characterised by unprecedented and sustained levels of promotional activity across the sector with, in several cases, distressed discounting from brands and retailers and heightened competition.
"The group’s performance has been impacted by very difficult trading conditions throughout the period, amplified by heightened levels of consumer uncertainty across many of Ted Baker’s global markets.
"The financial results we delivered in the first half were behind our expectations. Trading in the second half has started slowly, not helped by the unseasonably warm weather in September, and this will have an impact on the full-year outcome. If these trends continue, we will achieve a second-half result below that of last year."
Shares had lost about a third of their value in the first hour or so of trading.
The group, which has some 560 stores and concessions around the world, also revealed that its independent inquiry into the behaviour of founder and former chief executive Ray Kelvin has cost £2m in legal fees and other expenses.
Kelvin was forced to quit the business he founded after staff complained that he acted inappropriately in the workplace. He has denied any wrongdoing.
Adam Vettese, investment analyst at multi-asset investment platform eToro, said: "Ted Baker shares have been hammered over the last two years and today’s profit warning has caused another monumental drop in its share price as investors all but give up hope that the business can turn itself around.
"Current retail conditions have made it tough for the business, with competition from online specialists such as Boohoo taking more market share. Ted Baker has already started reacting to this by increasing its online presence which has gained some traction.
"Other challenges facing the group include higher rents, and many competitors - including Primark's parent company Associated British Foods - have recently petitioned landlords for lower rents amid tougher trading conditions."
Time will tell
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, noted: "Ted says unprecedented levels of discounting across retail, and the continued shift to online shopping is to blame for poor performance. These have definitely proved significant challenges for the group, as knocking down prices has caused gross margins to shrink.
"Ted Baker is causing some of its own problems too. There were issues with the spring/summer collection, and that’s not really the kind of mistake retailers can afford at the moment. And the biggest hammer to profits has been increasing costs, with restructuring and distribution spending ramping up as Ted tries to turn itself into something more lucrative.
"Ted’s future fortunes lie in its ability to get its cost base under control. Sales performance hasn’t been too bad, so there’s clearly demand for what Ted is selling, just not necessarily at the price it needs them to be.
"Only time will tell if Ted can find a way to rejig its offering in a profitable way, at the moment that looks to be some way off."