Profits to plunge at Joules as stores feel impact of Covid closures
Pre-tax profits at Joules are expected to drop by more than half for the 26 weeks to 29 November, reflecting the impact of enforced store closures, lower overall footfall trends when stores were open and the cancellation of country shows across the UK, the retailer has said in a Trading Update.
Profits for the period are anticipated to come in at between £3.5m to £4.0m, down from £8.4m the previous year, with a group revenue for the period of £94.5m down by 15.3% year-on-year.
Despite strong e-commerce sales growth of 35% and revenue from Joules’ own e-commerce channels up by 45%, Joules’ total retail revenue of £75.3m was 6% lower than the comparable prior year period.
Total store sales in the period were down by 46% year-on-year and retail gross margin decreased by approximately 3%pt in the period.
When comparing the period that Joules stores were open against the prior year, store sales were ahead of the board’s expectations and 17% lower year-on-year.
The reduction in retail gross margin was the result of increased promotional activity during the first three months of the period - particularly within the stores channel reflecting the clearance of elevated levels of spring/summer stock “within a highly competitive retail environment following the first national lockdown,” Joules added.
E-commerce represented more than 70% of the group’s retail revenue during the 26-week period, with traffic to the Joules website up more than 40% and further conversion rate improvements.
The Friends of Joules digital marketplace has provided customers with a broader online offer with over 10,000 products curated from 300 third-party sellers.
Wholesale revenue in the period was £17.2 m, a 44% reduction year-on-year, reflecting the ongoing impact of Covid-19 on many of the group’s wholesale partners both in the UK and overseas.
As a result of the challenges faced by the group’s international wholesale partners and despite continued strong growth through the group’s international websites, total international sales in the period were down by 29% against the prior year and represented 14% of group sales.
The group’s balance sheet remained “strong” with net cash of £15.6m and liquidity headroom of £64m, Joules said.
Joules chief executive Nick Jones added: “The strength of our digital proposition, the increased number of Joules customers and the growing appeal of the brand has meant that Joules has continued to trade well during the period, despite the impact of enforced store closures.
“We delivered a good Black Friday trading period through our online channel and our Friends of Joules digital marketplace continues to perform ahead of our expectations.
“We have strong momentum - particularly through our online channel - and a good stock position that underpins our confidence for the peak Christmas trading period.
“We have been pleased with the performance of our stores in England for the first few days since their re-opening in early December.
“As anticipated, our wholesale sales have been subdued in the first half, however an improved performance over recent weeks and the positive response to our spring/summer 21 ranges, that were sold-in via our digital B2B sales platform, gives us confidence for the recovery of the wholesale channel over the coming seasons.
“The retail sector continues to face a number of near and medium-term challenges, including the ongoing impact of Covid-19 on our communities and economy as well as Brexit-related uncertainties.
“I have no doubt that Joules, underpinned by the strength of our brand and our flexible and scalable platform that now includes our Friends of Joules digital marketplace, is well positioned to be one of the long-term winners against this challenging backdrop.
“I would again like to thank all of Joules’ stakeholders for their continued support and commitment to our brand,” he added.