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Fashion retailer Ted Baker has said it may have overstated the value of its stock by between £20m and £25m. Law firm Freshfields Bruckhaus Deringer is to carry out a review, and independent accountants will also be appointed to investigate.

Shares in Ted Baker fell 10% as analysts described the news as “less than ideal” This year, former boss Ray Kelvin stepped down over misconduct claims, while sales and profits have tumbled.

The company said in a statement: “Ted Baker is committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate. Whilst the review is ongoing, the company will not comment further.”

Ted Baker added, however, that it did not expect any cash impact from the overstatement of inventory. Essentially, Ted Baker may have had up to £25m of stock, mainly clothing, on its balance sheet that did not exist.

The problems are the latest setback in a difficult year for the firm.

In March, Mr Kelvin – who had been chief executive since the company’s launch in 1988 – resigned over claims he presided over a culture of “forced hugging”. He has denied all allegations of misconduct.

The company has also seen its sales, profits and share price tumble. In October, the retailer reported a £23m loss for the six months to 10 August, down from a £24.5m profit last year.

Retail analysts at Liberum said: “Today’s latest news from Ted Baker, regarding the overstatement of last year’s inventory value, is less than ideal.” The company is due to publish its latest trading next week.