// Terms of agreement between Next and Joules still to be agreed with share price falling further
// Joules recently issues a profit and trading warning, while its CEO departed after just three years
Next’s potential acquisition of a stake in Joules is under threat, with the two fashion retailers still unable to agree on the terms of an investment.
Next is exploring taking a £15 million stake in Joules, under which the struggling clothing chain would adopt Next’s ecommerce infrastructure services, including its website, warehousing and distribution.
However, Sky News has reported that Next has not received enough financial information to make a formal proposal and that questions remain about whether it will proceed with the deal at no less than 33p a share, the level of the share price when the talks were first revealed.
This is because the value of Joules has fallen and this morning its shares will open at 25½p, down from 254p this time last year.
Just under two weeks ago Joules sounded a profit warning, blaming hot weather for lower sales of key lines such as raincoats, jumpers and boots.
Liberum, its house broker, had expected the company would record a pre-tax profit of £3.4 million in this financial year, but is now expecting a loss of £7 million.
Analysts also cut their estimates for the following year, predicting that Joules would just about break even, having initially anticipated a £3.6 million profit.
READ MORE: Joules confirms talks with Next about acquiring £15m minority stake
The profit warnings came alongside a disappointing trading update in which Joules said that waning consumer confidence was continuing to impact sales and would make it difficult to pass on “severe” cost inflation.
This morning Joules confirmed: “The group continues positive discussions with Next Group about both adopting its Total Platform services to support its long-term growth plans and a potential equity investment. There can be no certainty that these discussions will lead to any agreement, and further announcements in this regard will be made if and when appropriate.”
Joules was launched in 1989 by Tom Joule, who started selling clothes at a country show in Leicestershire before switching to a mail-order business.
Today the company employs 1,700 staff, 137 stores and more than two million digital customers.
Earlier this year Joules agreed to part company with its chief executive Nick Jones, who had been in the post for less than three years.
Former John Lewis director Jonathon Brown has taken over the helm.
As of the end of last July, Joules’ net debt stood at £21.1 million, having started the year with net debt of just over £5 million.
Its bosses said they were confident that the company would have “sufficient liquidity” to manage its working capital requirements.
Next already has joint ventures with Reiss and Victoria’s Secret. It teamed up with Davidson Kempner, a hedge fund group, to buy JoJo Maman Bébé earlier this year
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