Bosses at the fashion label, which has Scottish roots, revealed its Baker range will be designed in collaboration with Next, with the first collection hitting shelves next spring.
The decision to leave Debenhams comes less than a week after the department store chain unveiled its new chief executive, Stefaan Vansteenkiste, who will start his attempt to turn around the retailer.
Debenhams will continue to sell Ted Baker lingerie but the childrenswear ranges will go when the relationship formally ends on 29 February.
Lindsay Page, Ted Baker chief executive, said: “Product licensing is a proven and highly successful pillar of Ted Baker’s strategy to expand as a global lifestyle brand. It enables us to carefully develop the brand in new, relevant categories by leveraging the specialist product expertise of our carefully selected partners.”
Next already has a relationship with Ted Baker, selling its brands through its Label business. At the most recent set of results, chief executive Simon Wolfson said the Label division had been particularly strong, helping drive a 12 per cent growth in online sales.
Lord Wolfson, a Conservative peer who recently played down concerns about a potential no-deal Brexit, said: “We are thrilled to have the opportunity to help build and develop the Ted Baker children’s business across the globe. We have worked with Ted Baker for a number of years through Label and recognise the power of their brand.”
Analysts welcomed the decision, despite Ted Baker saying the deal will not immediately boost profits significantly.
Retail analysts at Liberum pointed out that the licensing business for Ted Baker has been particularly strong in recent years, accounting for 30 per cent of profits.
They added: “We believe the new agreement significantly de-risks Ted’s childrenswear business.
“Its current partner Debenhams has clearly been struggling for some time and its financial health has deteriorated.
“Switching to Next brings in an ambitious new partner, with a strong balance sheet and the capacity to properly invest behind the product.”