Joules says recent trading has been tough

By

Sandra Halliday

Published
Aug 19, 2022

Struggling lifestyle retailer Joules has rarely been out of the news in recent weeks and on Friday it made headlines again as it reported that recent “trading has softened materially” and H1 profits will be hit.

The company — which in recent weeks has announced a new CEO and that it’s in talks with Next for the latter to take an equity stake in the business — said the last five weeks have been tough.

In a stock exchange statement, it said: “In the group's previous trading update on 19 July, it reported significant pressure on gross margins with consumer appetite weighted towards markdowns amidst a heavily promotional environment. 

“Over the subsequent five weeks (to 14 August), trading has softened materially. The recent extremely warm and dry summer weather has adversely affected full-price sales of core categories such as outerwear, rainwear, knitwear, and wellies and has compounded the ongoing subdued consumer demand due to the well-documented cost of living crisis. 

“Retail sales have consequently been depressed over this five-week period, resulting in an 8% year-on-year reduction in retail sales in the 11 weeks of the current financial year to date.”

And while there was some good news as wholesale trading for the Joules brand has achieved 10% growth year-on-year (despite delays experienced in US ports), its acquired Garden Trading brand’s wholesale operation “has continued to be significantly impacted by the wider slowdown in the home and garden market”.

Retail margins in the financial year that started on June 1 have dropped by around 6%pts year-on-year. 

“This reflects the shortfall of full-price sales and the level of discounting that has been required to engage customers in the highly promotions-driven retail landscape”, it explained. 

But while overall margins have been weak in the year to date, it added that “we expect partial recovery in the coming months as sales of full-price Autumn/Winter collections become a more important part of the mix”.

Other bits of good news include active customer numbers now standing at over 2 million (up 10% on last year); brand awareness also rising; and the company continuing “to make good progress with its initiatives to simplify the business and improve profitability as outlined in previous statements”.  

But none of that was enough to rescue a poor situation and Joules said it expects “a significant loss in the first half”. That said, it should be “followed by an improved performance in the second half as the benefits of business simplification begin to be realised”. It will mean a full-year loss before tax, and before adjusting items, that’s “significantly below current market expectations”.

The company doesn’t appear to have any liquidity problems at present having taken steps to shore up its finances and its talks with Next are ongoing.

It said on Friday that it “continues positive discussions with Next Group about both adopting its Total Platform services to support its long-term growth plans and a potential equity investment. There can be no certainty that these discussions will lead to any agreement, and further announcements in this regard will be made if and when appropriate”.