Joules warns of full year loss significantly below market expectations

// The hot summer and costs of living crisis have driven a promotional season

// Joules expects a stronger second half amid business simplification strategy

UK fashion brand Joules has reported sales down 8% in the 11 weeks since the end of its financial year to 31 May 2022.

Amid challenging trading conditions, the company also warned that it expects a full year loss before tax, and before adjusting items, “significantly below” current market expectations.

In the group’s previous trading update on 19 July 2022, Joules reported significant pressure on gross margins with consumer appetite weighted towards mark-downs amid a heavily promotional environment.

The company said that over the subsequent five weeks to 14 August, trading has softened materially, with the hot and dry summer weather adversely impacting full price sales of core categories along with the 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.

Wholesale trading for the Joules brand has achieved 10% growth year-on-year despite delays experienced in US ports, however garden trading wholesale has continued to be significantly impacted by the wider slowdown in the home and garden market.

Retail margins in the year to date have declined by around 6% year-on-year. This reflects the shortfall of full price sales and discounting in a highly promotions-driven environment. While overall margins have been weak in the year to date, Joules said that it expects partial recovery in the coming months and active customer numbers now stand at over two million, a 10% increase on last year.

READ MORE: Joules hires ex-John Lewis director as CEO

The board expects a significant loss in the first half, followed by an improved performance in the second half following its business simplification initiatives. In light of this, the board currently expects the group to deliver a full year loss before tax, and before adjusting items, “significantly below” current market expectations.

As at the end of July, the group’s net debt was £21.1m, leaving headroom under its bank facilities of £11.4m. Since then, Joules has completed a £5m addition to its borrowing facilities, available until November 2022, to help support working capital requirements, and expects a waiver of certain covenants on its facilities amid positive discussions with its bank.

Further to the announcement on 7 August, Joules said 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.

Joules will release results for the financial year ended 31 May 2022 in late October.

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