Premium British lifestyle group Joules (JOUL) delivered a raft of bad news, including the unwelcome revelation current profits were below expectations.
Investors wasted no time heading for the exit, sending the shares down 36% to 35p, their lowest level since the firm floated on the stock market in 2016.
WEAK EARNINGS AND CAUTIOUS OUTLOOK
While the firm said sales had grown strongly in the 13 weeks from the beginning of February to the end of April, it warned trading had become more difficult.
‘Market conditions have become more challenging during and following the Easter period as consumer confidence has been impacted by the rising cost of living.’
The firm went on to say ‘Joules has not been immune to these sector-wide pressures, which have led the group's profit performance to fall below management's expectations’ in certain business areas.
Increased promotions and reduced demand for full-priced goods has ‘significantly impacted’ the group’s margins, while weak consumer confidence has meant the recently-acquired Garden Trading business performed ‘significantly below expectations’ over its peak sales period in March and April.
Given the challenging market conditions, which are expected to continue into the first half of the new financial year, the firm said it was ‘cautious about the near term’.
CHANGE NEEDED
Management has already identified areas which need improving, including raising its minimum UK wholesale order quantities for the spring/summer 2023 collection while exiting the wholesale business completely in Europe and the US.
The product process also needs to be simplified to reduce costs and shorten lead times, giving the firm a better mix of new and therefore full-price items.
However, current chief executive Nick Jones has decided he won’t be part of the revamped group and will step down in the first half of the coming financial year.
Today’s comments from Joules, and the reaction in its share price, will reverberate across the fashion retail sector, which is entirely dependent on discretionary spending at a time when household budgets are being squeezed as never before.
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