Joules Group PLC (LON:JOUL) delivered strong growth in first-half profit and revenue but shares dropped as margins weakened and the fashion retailer lowered its interim dividend.
Underlying pre-tax profit rose 14.7% year-on-year to £10.7mln in the 26 weeks to November 25 as revenue gained 17.6% to £113.1mln.
However, the retail gross margin fell 80 basis points to 54.5% due to a higher proportion of lower-margin e-commerce sales.
E-commerce sales accounted for 46.5% of retail sales, which rose 21.2% to £79.9mln in the first half as the number of active customers increased 20% to 1.4mln.
Wholesale revenue grew 26% to £32.5mln, driven by demand in North America, while revenue from licensing activity rose to £0.8mln from £0.2mln last year.
International revenue jumped 64.2% and represented 15.8% of total group revenue, boosted by a strong performance in Germany and the US.
Cash position strengthens but dividend reduced
The company ended the period with net cash of £4.3mln, compared to £3.0mln last year. An interim dividend of 0.75p was declared, down from last year’s 0.70p payout.
Joules maintained its guidance for full-year underlying pre-tax profit.
"We have continued to trade well since the Period end with a good performance through the festive period and positive customer reactions to our new collections," said chief executive Colin Porter.
"We have an outstanding brand, good momentum and a growing customer base and we look forward to the second half of the financial year with confidence."
In morning trading, shares declined 1.9% to 254p.
Peel Hunt keeps 'buy' rating as profits beat expectations
Peel Hunt said the underlying pre-tax profit was ahead of its upgraded forecasts of £10.5mln as it reiterated a ‘buy’ rating and target price of 400p on the stock.
The broker noted that Joules also enjoyed a stellar Christmas with an 11.7% increase in retail sales in the seven weeks to January 6.
READ: Joules toasts to strong Christmas trading performance
“It seems prudent to leave our forecasts unchanged at this juncture, but based on performance over the second half to date, the risk to numbers remains on the upside,” it said.
“Short term trading aside, we continue to see significant upside to medium term EBIT margins and international growth prospects, Joules continues to outperform, as a strong product file and high levels of customer engagement is backed up by a well-invested infrastructure and flexible, multi-channel model. US growth potential remains exciting.”