Joules Group PLC (AIM:JOUL) warned that it expects to report a full-year loss, "significantly" below market expectations, as margins continue to be pressured by a “heavily promotional environment”.
The luxury clothing and homeware group said trading had softened materially in the five weeks since its 19 July trading update, with the recent heatwaves affecting full-price sales of some of its core categories, such as knitwear and wellies.
As a result of promotions and subdued demand due to the cost-of-living crisis, sales were down 8% year-on-year in the first 11 weeks of its current financial year.
Retail margins were also down 6 percentage points year-on-year, reflecting “the shortfall of full price sales and the level of discounting”, although the company expects margins to partially recover during the release of the autumn/winter collection.
Joules forecast a "significant" loss in the first half, but said its performance should improve in the second half as a result of a simplification of the business, which includes focusing on profitable partnerships, shorter lead times and diversifying the group’s supplier base.
The company also said it continues to have “positive discussions” with Next over a potential equity investment and adopting Next's Total platform to “support its long-term growth plans”.
At the end of July, net debt stood at £21.1mln for the retailer and it expects to have sufficient liquidity to manage its working capital requirements.
It noted that it expects to require a waiver of certain covenants on its facilities and is currently in positive discussions with its bank.
It added that discussions with its bank on its medium-term financing continue.