Joules Group PLC (LON:JOUL) said it has made contingency plans to prepare for the impact of a ‘hard Brexit’ as it raised its first-half underlying profit guidance.
The fashion retailer said it would set up a third-party distribution facility in the European Union to mitigate the disruption that could arise in the event of a 'hard’ Brexit.
The group is also ordering products for its Spring/Summer 2019 collection earlier than planned, preparing for an expected increase in administrative activities and hedging its US dollar requirements more than 12 months forward in anticipation for a further devaluation of the pound.
The move comes ahead of next Tuesday’s parliamentary vote on Prime Minister Theresa May’s Brexit deal, which many MPs are expected to vote against. If MPs reject the plan, Britain could fall out of the EU next March without a deal, leading to a ‘hard Brexit’.
Joules shrugs off high street downturn
Joules announced its Brexit contingency plans in a trading statement for the six months to November 25, which showed the company delivered a 17.6% year-on-year increase in revenue to £113.1mln for the period.
Retail revenue gained 21.2% to £79.9mln, driven by a strong performance in e-commerce sales.
Wholesale revenue rose 8.0% to £32.5mln, led by solid growth in international markets in the US and Germany. International sales now represent about half of total wholesale sales following the expansion of the Joules brand overseas.
READ: Joules expects profits to be slightly ahead of expectations
Joules said it now expects underlying pre-tax profit to be “slightly ahead” of initial expectations for the period.
"I am delighted to update on what has been another period of strong performance for Joules despite challenging trading conditions,” said chief executive Colin Porter.
“ This performance, which is ahead of our initial expectations for the Period, is a testament to the strength of the Joules brand, the engagement of our loyal customers with our product collections, and our fantastic teams.”
Joules maintains full-year guidance but cautions on economic uncertainty
For the 2019 financial year, the company expects to meet its pre-tax profit estimates on the back of a robust first-half performance and strong Spring/Summer 2019 wholesale order-book.
However, the retailer said it expects trading conditions in the UK will remain challenging over the near term with continued macroeconomic uncertainty, rapidly changing consumer shopping behaviours and a highly competitive environment.
In morning trading, shares rose 3.8% to 223p.
Peel Hunt maintained a ‘buy’ rating and target price of 400p on Joules.
“We upgrade first-half pre-tax profit forecasts by 3%, but leave our full-year forecasts unchanged ahead of Christmas, noting the signs for full-year outperformance look good,” the broker said.
“We see this as the perfect buying opportunity, noting the accelerating momentum in the US, strong core performance and the wider medium-term potential for the brand and margin delivery.”