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February 9, 2022

Joules H1 profits sink on increased costs

First-half profits at British lifestyle retailer Joules have taken a hit on increased operating expenses as a result of higher wages in distribution centres and the end of government support measures post-Covid.

By Hannah Abdulla

Joules hailed a strong recovery in retail demand to almost pre-pandemic levels which led to a 35% jump in first-half group revenue compared to the same period last year, but profits were lower.

Joules recorded group revenue of GBP127.9m (US$173.7m) for the 26 weeks ended 28 November, compared to GBP94.5m a year prior. Compared to the first half of 2019, group revenue was up 15%.

Store revenue increased by more than 80% to GBP35.5m. Total e-commerce sales across the group’s websites and third-party e-commerce partners increased by 14% against the prior period, and 53% on a two-year basis, driven by Garden Trading (acquired in February 2021) and strong performance through the group’s digital partners.

Profit before tax pre-adjusting items amounted to GBP2.6m, a fall of GBP1.1m compared with the GBP3.7m recorded in the prior-year period. Profit was GBP5.8m lower than the first half of 2019.

Gross margin increased by 0.2% percentage points to 50.4% due to an improved mix of full-price sales and recovery of higher-margin store revenue, offset by significant increases to freight costs and outbound Brexit duties and taxes.

Joules said operating expenses increased by 52.6% in the 26-week period, reflecting the end of government support and other Covid related savings in the prior year; increased wage costs in its distribution centre; increased digital marketing costs; and the acquisition of Garden Trading.

Statutory profit before tax after adjusting items, meanwhile, doubled to GBP2.6m from GBP1.3m in 2020 and was up from GBP1.7m in 2019.

CEO Nick Jones said: “Whilst the group experienced strong levels of customer demand that resulted in good revenue growth against the prior two comparative periods, group profitability in the first half was impacted by various factors, most notably the severe inflationary cost environment. We have a clear plan of action to simplify the business, enhance efficiencies and mitigate the cost pressures that will enable the group to convert the strong levels of customer demand into sustainable, profitable growth.

“Whilst we acknowledge that there are areas within the business where we need to simplify our operations and improve profitability, we remain very excited in our long-term growth prospects. We have continued to see improvements in brand awareness and customer numbers, and we are confident that our broadened lifestyle proposition – which benefits from increased product and category diversification through Friends of Joules and Garden Trading – is more relevant than ever to consumers.”

Last week, Joules sounded a profit warning on its full-year profits as weaker than expected revenue in January and delays to new stock arrivals as a result of global supply chain challenges take a toll.

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