Joules today set out how global supply chain issues, rising distribution costs and a fall in footfall look set to affect its profits in the second half of its financial year. The multichannel fashion retailer now expects that trading will recover in the rest of the year, as visitors return to shops and as it has more new stock – although some prices will have to rise.
In the first six months of its financial year – to November 28 2021 – Joules reports that revenues came in at £127.9m up from £95.4m a year earlier, and pre-tax profits before one-off costs came in at £2.6m, down from £3.7m last time.
In the nine weeks to January 30, revenue was 31% up on last year, and 19% up on the previous year. However, this is behind expectations, and reflects the effect of the Omicron variant on retail footfall (-36% on two years earlier) as well as delays to stock arrivals as a result of global supply chain issues. That in turn had a knock on effect on the proportion of its sales that were full price. At the same time, wholesale revenue is also down because of delays to stock and customer cancellations.
Meanwhile, increases in freight, duties and distribution costs – including £1.2m in extra costs at its third-party operated distribution centre – are putting pressure on profitability. The retailer is now reducing its costs and simplifying the business in order to improve its profit margins. It is selling off old and slow moving stock via outlets and third parties and ending some relationships with EU agents and third-party stockists, while introducing a minimum order value in the US and cancelling unprofitable orders. Selected prices are set to rise for the spring and summer season, “reflecting the higher cost environment”.
Joules says, however, that its wholesale order book is strong and that its direct to customer operation is getting back to normal, with “delivery times back to standard service levels and productivity improved”. The retailer expects profits to come in at not less than £5m in the full year. In the last full year it reported adjusted pre-tax profits of £6.1m.
As of January 31, Joules had net debt of £21.5m, with headroom of £11.5m still available.