More than half of Joules’ sales were made online for the first time during its latest financial year while in-store sales fell by a fifth – with trends that were already affecting the business accelerating as a result of the coronavirus pandemic. But Joules says its 128 shops remain an important part of its ’total retail’ multichannel model – as long as it can ensure ‘suitable’ rents.
The fashion and homewares lifestyle retailer, ranked Top250 in RXUK Top500 research, today reported falling sales and a pre-tax loss as a result of both the Covid-19 pandemic and supply issues over the Christmas trading period. Now, it says, it is preparing for a hard Brexit.
Balancing stores and online
Joules today reported sales of £190.8m in the 53 weeks to May 31.That’s down by 12.5% compared to the previous year. Online sales via its own website grew by 11% during the year to account for 57% of retail sales – up from 49.5% in the previous year. For the first – pre-Covid – nine months of the year, ecommerce had accounted for 51% of the group’s retail sales but during the final quarter of the year e-commerce
Over the course of the year, revenues from stores fell by 21.4% as an 8% fall in the nine pre-Covid months accelerated as a result of lockdown. However, the retailer believes that its “increasingly digitally-enabled” 128 shops remain important as “valuable touch points to showcase the brand to both existing and potential customers”. Twenty per cent of shop transactions during the year were multichannel ones that involved the digital channel at some point. They included click and collect, order-in-store and online returns to the store. But not all of its shops are paying their way. Fifteen branches of Joules account for two-thirds of a £15.8m write-down in the value of its shops – related to whether rents paid for those shops are justified by the turnover. The retailer says it will close or relocate those shops if it cannot negotiate “suitable rent terms” at the next renewal.
Overall, said Joules chief executive Nick Jones in today’s full-year statement, “The investments made in recent years into our digital channels have driven ecommerce sales to represent half of our retail sales and I strongly believe that we now have a great opportunity to build on this platform and ramp-up our ecommerce market penetration.
“We will continue to consider the appropriate shape and size of our retail store estate, including renegotiating leases where appropriate to ensure that our store estate remains highly relevant to our customers and contributes to our ’Total Retail’ model.”
Wholesale revenues fell by 25.3% during the year, as a result of a 75% drop in trade sales in the final quarter, as customers closed their shop doors in response to the pandemic. Some 15.5% of sales – or £29.5m – were international ones, primarily via the US and Germany.
Pre-tax losses for the year fell to £25.3m, from a profit of £12.9m last time, reflecting both one-off costs of £21.5m – related to the write downs of £21m – and the effect of new accounting regulations.
Looking ahead, Joules has a Brexit task force that is currently working to mitigate the effects of a likely hard Brexit on the UK. It has set up its UK logistics facility as a bonded warehouse while also gaining certifications as an authorised economic operator. But, it added: “Notwithstanding these mitigating actions, the group’s wholesale and ecommerce sales into the European Union could face a period of operational disruption and potentially increased costs as a consequence of a hard Brexit.”
Jones said he was proud of how the business had responded to Covid-19 disruption.
He added: “We were quick to bolster our liquidity position, preserve cash and focus our trading online and we are very encouraged by the more than 70% growth in ecommerce demand since the start of the new financial year as well as the performance of our stores since reopening. This is testament to the strength of the Joules brand, the relevance of our product range, the desirable locations of our stores and the flexibility of our model.
“Whilst the Group’s financial results for FY20 were impacted by challenging external trading conditions in the UK throughout the year; the stock availability issue that, as previously reported, impacted our ecommerce sales over the Christmas trading period; as well as material Covid-19-related disruption during the final quarter, I am very pleased with the continued progress we have made against our long-term strategic goals. We have further strengthened our flexible ’Total Retail’ model; enhanced our UK and US supply chain operations to support our growth plans; and launched Friends of Joules, an exciting new digital marketplace.”
Over the year the retailer completed the outsourcing of its distribution operations to Clipper Logistics and started developing a new Market Harborough head office.