Loss-making Joules stays upbeat as e-tail outperforms

By

Sandra Halliday

Published
Aug 6, 2020

Lifestyle fashion brand Joules reported its preliminary annual results on Thursday and despite the numbers including its toughest trading period ever that resulted in a pre-tax loss, seemed upbeat about the figures and about its prospects.

It wasn’t only the 53 weeks to May 31 but the weeks since then that are the cause of its optimism. The company spoke of “encouraging recent trading” and said this “reflects the strength of the Joules brand with continued strong e-commerce demand during the UK lockdown”.

In fact, the trading performance has been “ahead of management's expectations” in the first nine weeks of the new year (FY21) and e-commerce demand is up more than 70% on the comparable period in the prior year.

All stores have also now reopened with their “overall performance ahead of expectations” while wholesale is performing “in line with expectations”.

And the company has a strong financial position with net-cash of £5.4 million and liquidity headroom of £54 million as of August 2, which is  better than management had predicted.

The company has also been forging ahead with initiatives such as its Friends of Joules digital marketplace; its UK and US distribution centre transformation initiatives that are now complete and provide improved capacity, service levels and productivity; plus its new store point of sale platform that further integrates the store experience with its digital channels.

NOW FOR THE BAD NEWS

That’s all good news, of course. But it can’t disguise the fact that FY20 was a difficult year in which the firm saw some mis-steps around product supply online during the Christmas shopping period and had to deal with the effects of the pandemic.

It all meant group revenue fell by 12.5% to £190.8 million with the revenue impact of Covid-19 in Q4 alone being £31 million.

Thankfully, e-tail’s Christmas issues were dealt with and the channel performed well overall with Joules’ own webstore revenue up around 11% for the year. In total, e-tail represented nearly 57% of retail sales (up from 49.5% the year earlier). For the first nine months, pre-Covid-19, online represented nearly 51% of retail sales.

But store revenue declined both before and after the pandemic with a drop of 8% in the first nine months and it was 21.4% down for the full year. This reflected “structural industry trends and reduced promotional activity” and suggests that Joules, like many other retailers, might need to think long and hard about store numbers in the future.

Wholesale was hit by Covid too with an annual drop of 25.3% but a Q4 fall of 75% “as wholesale customers globally closed their operations” due to the pandemic.

It all tipped the firm into a pre-tax, pre-IFRS16 and pre-exceptional items loss of £2 million after a profit of £12.9 million a year ago. The statutory loss before tax was £25.3 million, with the profit on that basis a year earlier also having been £12.9m.

CEO Nick Jones said the retail sector will continue to face challenging trading conditions over the coming months, but “I believe that Joules is very well positioned to navigate both the existing and potential further Covid-19-related challenges and continue to invest in targeted growth opportunities. The Joules brand’s awareness and health metrics have never been stronger, and I firmly believe that, underpinned by our strong brand purpose, Joules is more relevant than ever before”.