Joules issues another profit warning as sales tumble | This is Money

2022-08-20 02:37:51 By : Ms. Michelle Jiang

By Camilla Canocchi for Thisismoney.co.uk

Published: 06:33 EDT, 19 August 2022 | Updated: 06:33 EDT, 19 August 2022

Joules has issued another profit warning and told investors it will have to ask its lenders for a waiver on the conditions for some of its debt agreements.

The troubled fashion retailer, known for its posh wellies, said the hot weather and the cost of living crisis hit demand for its products, with sales in the last 11 weeks down 8 per cent compared to last year. 

Heavy discounting used to attract reluctant shoppers has also hit profit margins, which declined by around 6 percentage points.

Profit warning: Joules expects to slump to a loss in the current year 'significantly below current market expectations' as sales continue to fall

It forecasts a 'partial recovery' in the coming months from full price sales of its autumn and winter collections. 

However, in light of recent poor trading and the ongoing soaring cost of living affecting consumer spending, Joules expects to slump to a loss in the current year 'significantly below current market expectations'.

The company, whose financial new year started in June, said it expects a 'significant' loss in first half, followed by an improved performance in the second as its 'business simplification' begins to pay off.

Joules shares tumbled another 36 per cent to 28p in morning trade on Friday, leaving them down 80 per cent so far this year. 

'The recent extremely warm and dry summer weather has adversely affected full price sales of core categories such as outerwear, rainwear, knitwear, and wellies and has compounded the ongoing subdued consumer demand due to the well-documented cost of living crisis,' the group explained.

Joules' heavy discounting finds support in today's retail sales data, which flagged feedback from retailers suggesting a range of promotions in July helped to drive sales.

However, this eats into margins and retailers risk 'getting sucked into the eternal discount war', according to AJ Bell financial analyst, Danni Hewson. 

'Herein lies the problem for so many retailers,' he says. '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.

'Customers will become accustomed to enjoying money-off promotions and will expect to see them forever. 

'It’s a dangerous game to play and takes a lot of effort to wean customers off these discounts.'

Joules tried to reassure investors that it was in 'positive' talks with both its lenders about a covenant extension and with rival Next over a potential £15million equity investment.

Last week, the company confirmed it was in talks with Next over possibly outsourcing its online operations and logistics to its larger rival. This could involve Next taking a £15million stake in the business. 

Meanwhile last month, Joules called in advisers at KPMG to help it bolster its finances.

The group has since agreed an extension to its banking facilities with main lender Barclays, though this restricts its ability to pay shareholder dividend payouts. 

But today, it said it expected 'to require a waiver of certain covenants' on its debt facilities.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

The comments below have not been moderated.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

By posting your comment you agree to our house rules.

Do you want to automatically post your MailOnline comments to your Facebook Timeline?

Your comment will be posted to MailOnline as usual.

Do you want to automatically post your MailOnline comments to your Facebook Timeline?

Your comment will be posted to MailOnline as usual

We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook.

You can choose on each post whether you would like it to be posted to Facebook. Your details from Facebook will be used to provide you with tailored content, marketing and ads in line with our Privacy Policy.

‘What the money news means for you’

This is Money is part of the Daily Mail, Mail on Sunday & Metro media group