By Scott Wright
JOULES Group saw more than one-third wiped off its stock market worth yesterday after the clothing-to-homeware retailer reported full-price sales have been hit by hot weather and weak consumer confidence, putting it on course to make a “significant loss” for the first half and slide into the red for the full year.
The troubled retailer, which has seen its share price tumble by around 90 per cent in a year, said the heatwave in the last five weeks had “adversely affected” full-price sales of its core outerwear, rainwear, knitwear and wellies.
And it declared these struggles have been “compounded” by “ongoing subdued consumer demand”, stating it has had to cut that prices in order to engage customers in a “highly promotions-driven retail landscape”. Margins are down by six percentage points in the year to date, said Joules, which has around 130 stores.
The update from Joules came as official figures showed that UK retail sales volumes had increased by 0.3 per cent in July, following a revised fall of 0.2% in June. The Office for National Statistics noted that feedback from online retailers pointed to a range of promotions in July, which boosted sales.
Reporting that “trading has softened materially” since July 19, and with consumer sentiment remaining weak, Joules told the City that it now expects to make a “significant loss” for the first half. And it said it would slip into the red for the full year, “significantly below current market expectations”.
The full-year loss is anticipated in spite of expectations of an improved second half, during which Joules said it will start to reap the benefits of its “business simplification” strategy.
The company, which last week appointed former Compare the Market boss Jonathan Brown as its next chief executive, succeeding Nick Jones, has arranged a £5 million addition to its bank facilities. The extension, available until November, will support it “over its forthcoming seasonal borrowing peak”.
Net debt was £21.1m at the end of the July, leaving the company with £11.4m of headroom under its facilities.
Joules said: “The group expects to require a waiver of certain covenants on its facilities and is currently in positive discussions with its bank in this regard.”
The company is continuing talks with Next over a potential equity investment of £15m in Joules, with discussions also exploring the possibility of adopting Next’s online sales platform.
Danni Hewson, financial analyst at AJ Bell, said retailers such as Joules are running the risk of being dragged into an “eternal discount war”.
Ms Hewson said: “Just when you thought it couldn’t get any worse for retailer Joules, along comes another devastating profit warning.
“Customers have typically preferred to buy its goods if prices are slashed, so its margins have taken a big hit.
“Herein lies the problem for so many retailers. They are worried that consumers are under financial pressure so they’re panicking and discounting their goods thinking it’s better to sell something at a lower price than not at all.
“One of the biggest risks for retailers is getting sucked into the eternal discount war. Customers will become accustomed to enjoying money-off promotions.”
Shares in Joules closed down 15.45p, or 35.1%, at 28.5p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel