// The hot summer and costs-of-living crisis have driven a promotional season
// Joules expects a stronger second half amid business simplification strategy
Joules sales plunged 8% in the 11 weeks since the end of its financial year as the fashion retailer warned that it now expects a full-year loss “significantly below” market expectations.
The retailer, which earlier this week appointed ex-John Lewis director Jonathon Brown as its new CEO, revealed that it continues to have “positive discussions” with Next about adopting its Total Platform services and a potential equity investment, after it emerged that the pair were attempting to do a deal last week.
Joules had flagged in July that it was experiencing significant pressure on gross margins as consumers were seeking out markdowns amid a heavily promotional environment.
Trading has “softened materially” in the subsequent five weeks to 14 August, with the hot and dry summer weather adversely impacting full price sales of core categories and the cost-of-living crisis hitting demand.
READ MORE: Joules hires ex-John Lewis director as CEO
Retail sales have consequently been depressed over this five-week period, resulting in an 8% year-on-year plunge in retail sales in the 11 weeks of the current financial year to date.
Margins in the year to date have declined by around 6% year-on-year, reflecting the shortfall of full price sales and increased discounting in a highly promotions-driven environment.
While overall margins have been weak in the year to date, Joules said that it expects partial recovery in the coming months and active customer numbers now stand at over two million, a 10% increase on last year.
The board expects a significant loss in the first half, followed by an improved performance in the second half following its business simplification initiatives.
As at the end of July, the group’s net debt was £21.1m, leaving headroom under its bank facilities of £11.4m.
Since then, Joules has completed a £5m addition to its borrowing facilities, available until November 2022, to help support working capital requirements, and expects a waiver of certain covenants on its facilities amid positive discussions with its bank.
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