Joules Group PLC (AIM:JOUL) warned that its profit performance over the festive and new year period was behind board expectations, despite revenue being 31% better than the same period in 2021 and 19% better than 2020.
The clothing and homeware company said that global supply chain issues, weaker than expected footfall because of omicron, increased shipping costs and lower wholesale revenue were to blame for its disappointing profit before tax (PBT) performance in the nine weeks leading to 30 January.
It also lamented higher costs at its third-party distribution centre, which were roughly £1.2mln greater than it had expected.
Joules said it has now taken measures to limit the impact of the external factors that have hit profits, such as less spending on marketing, selling old and slow-moving stock to outlets, changing its wholesale operations and appropriate price increases.
The company said its first half results were in line with previous guidance, with revenue for the six months ending 28 November was £127.9mln, compared to £94.5mln like-for-like, with PBT at £2.6mln, down slightly on the £3.7mln achieved the year before.
Despite all this, the board expects trading to recover and final year performance to be in line with previously stated expectations, with PBT forecasted to be no less than £5mln.
Joules downgraded as cost headwinds hurt profits
Joules Group PLC (AIM:JOUL) has been downgraded to a hold by Peel Hunt, even with 43% wiped off its share price following the release of its trading statement this morning.
Joules slashed its full year profit-before-tax (PBT) to no less than £5mln, against previous guidance of between £9mln-£12mln.
The broker notes that while revenue was up in the nine-week period leading to January 30, profit was below board expectations thanks to supply chain issues and higher input costs.
Susannah Streeter, an investment and markets analyst at Hargreaves Lansdown believes “the foul conditions are not expected to improve any time soon,” for Joules.
She also adds that Joules strategy of offloading unwanted to stock to outlets and increase the prices of new stock is “not without risk.”
Streeter adds the strategy could see “cash strapped shoppers, opting for bargain basement Joules ranges in discount villages rather than paying higher prices for new styles in the group’s boutiques.”
“There will be concern that by moving in this direction, the Joules ‘lifestyle’ may be less appealing to the discerning shopper and could cause longer term damage to the brand, particularly with marketing spend also set to be reduced.’’
Shares in Joules were down 44% in afternoon trading, changing hands at 66p.