Fashion retailer Joules calls in advisers to shore up balance sheet
Fashion retailer Joules calls in advisers to help with plans to boost profits and shore up its balance sheet as cost-of-living crisis hits finances
- Joules has called in accounting giant KPMG to help with plans to boost profits
- It comes as High Street firm has seen its share price drop by 76 per cent this year
- Clothing firm said it is ‘focusing on improving profitability and cash generation’
- Like other High Street firms, it has faced changing shopping habits due to Covid
High Street fashion retailer Joules has called in advisers after a dramatic share price drop.
The posh wellies chain, which has 132 stores and 7 concession and franchise outlets across the UK, has seen its share price drop by 76 per cent this year.
The declines have been compounded by a profit alert and cash crunch worries following a lasting change in shopping habits as a result of the Covid pandemic.
And with Britons now facing a cost-of-living crisis, made up of spiraling fuel prices, heating costs and food prices, there are fears among High Street retailers of another sales dip.
Today the retailer, which also trades online through its website, confirmed it had enlisted the help of major accounting firm KPMG to look at bolstering its finances.
The firm said it has hired KPMG to help with plans to boost profits and shore up its balance sheet.
Meanwhile, KPMG are said to be exploring options, including raising fresh capital, after inflationary pressures drained the retailer’s cash reserves, according to the Sunday Times.
In a statement today, Joules said: ‘The group continues to focus on improving profitability, cash generation and liquidity headroom.’
It comes after the firm’s boss, Nick Jones, said would step down in the first half of its next financial year.
High Street fashion retailer Joules (pictured: Library image) has called in advisers after a dramatic share price drop over the past year
It comes after the firm’s boss, Nick Jones (pictured), said would step down in the first half of its next financial year
The company, launched in 1989 as a brand selling clothing and homeware products inspired by British country lifestyles, has like many High Street retailers suffered from a change in shopping habits sparked during the Covid lockdowns from 2020 and 2021.
Its share price has plummeted by nearly 90 per cent over the past year, with declines compounded by the profit alert and cash crunch worries.
It said it has hired KPMG’s debt advisory practice ‘to assist in this process’.
But the group insisted debt levels remain within its banking agreements and as expected by management.
It said: ‘Whilst the group continues to manage its cash resources carefully over its seasonal borrowing peak, it expects to have sufficient liquidity to manage its working capital requirements over this time.
‘The group is making good progress against previously announced key initiatives aimed at simplifying the business and optimising the cost base to improve long-term profitability.
‘This includes implementing significant changes to its wholesale operations to focus on fewer, profitable wholesale accounts and improving and simplifying the group’s end-to-end product process to reduce costs and shorten lead times.’
Its May trading update saw it warn that ‘challenging’ market conditions and weak consumer confidence have affected recent trading.
Joules added that reduced demand for full-price items had hit profit margins across its owns channels, while it said profits would be knocked by ‘subdued’ demand for home and garden products.
Third-party sales had also been weaker than expected across some key UK accounts, it said at the time.
It comes as footfall continues to be down on pre-Covid levels, according to the latest data from Ipsos.
The firm said it has hired KPMG (pictured: KPMG’s London office) to help with plans to boost profits and shore up its balance sheet
Figures from today show how footfall is still down 19.9 per cent on 2019 levels across the UK.
The decline was slightly less in towns (16.8 per cent), compared to cities (19.9 per cent), while the biggest decline was in shopping centres (21.7 per cent).
In terms of regions, the Midlands (21.9 per cent) saw the highest decline compared to 2019, followed by London and the south east (20.3 per cent).
Earlier this year Joules said it had been severely impacted by rising costs and stock disruption in the nine weeks to the end of January.
Revenues were up 31 per cent and 19 per cent against 2021 and 2020 levels during the period, but Joules acknowledged these sales, in addition to profits, were ‘behind the board’s expectations’.
In efforts to counter ‘pressures on profitability’, Joules told investors it was practicing ‘cost restraint’ in marketing, head office and capex, liquidating ‘aged and slow-moving stock’, and simplifying wholesale operations.
The group, which sells clothes, shoes, homeware and garden furniture, revealed performance in the six months to 28 November were in line with previous guidance with revenues of £127.9million and pre-tax profits of £2.6million.
It had initially enjoyed a strong bounce back from lockdown conditions, boosting profit forecasts in June last year as it benefited from Britons’ desire to get back to nature and spruce up their homes and gardens during the pandemic.
However, Joules has since been impacted by weaker than expected revenue in January, which it partly attributed to the impact of the Omicron variant on retail footfall.
The group also highlighted delays to new stock arrivals as a result of global supply chain challenges, which weighed on revenues and gross margin.
Joules saw lower than expected wholesale revenue due to delayed stock and customer cancellations, while gross margin has additionally been hampered by increasing freight, duties and distribution costs.
It told investors: ‘The board’s base case expectation is for trading for the balance of the year to recover in line with its previously stated expectations, supported by recovering footfall and an improved level of newness in the stock position.
‘The wholesale orderbook for Spring/Summer 22 remains strong and the DC operation is normalising with delivery times back to standard service levels and productivity improved.
‘Assuming the Board’s base case is met, adjusted [profit before tax] for the full year is not expected to be less than £5million.’
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