British clothing retailer Joules has booked a drop in full-year sales and moved to a loss as the pandemic and e-commerce stock availability issues over the Christmas trading period weighed on results.
For the period ended 31 May, pre-tax losses amounted to GBP2m (US$2.6m) against earnings of GBP12.9m in the year ago period. Gross margin was down 4.1 basis points to 50.7%, impacted by sales channel mix and increased promotional activity in the final quarter.
Group revenues fell 12.5% to GBP190.8m, while retail sales amounted to GBP145.9m, with store sales down 21.4%. E-commerce sales, meanwhile, performed well, climbing 5% for the year, driven by strong sales through the group’s owned e-commerce channels. The division represented nearly 57% of retail sales.
Wholesale revenues, however, were significantly impacted by Covid-19 in the final quarter, falling 25.3% to GBP42.7m.
Despite the headwinds, Joules said it continued to increase its customer base, expand its presence internationally and deliver several important strategic initiatives – including the launch of its ‘Friends of Joules’ digital marketplace offering increased range and choice.
In the first nine weeks of fiscal 2021, Joules said trading was ahead of management expectations, with e-commerce demand up more than 70% on the prior year.
The retailer’s UK and US distribution centre transformation initiatives are also complete, providing improved capacity, service levels and productivity. Joules also began a supply chain modernisation programme during the second half across its UK and US operations aimed at building future capacity for growth, enhancing efficiencies and improving customer service levels.
“Whilst the group’s financial results for FY20 were impacted by challenging external trading conditions in the UK throughout the year…I am very pleased with the continued progress we have made against our long-term strategic goals,” said CEO Nick Jones.
“Whilst the retail sector will continue to face challenging trading conditions over the coming months, I believe that Joules is very well positioned to navigate both the existing and potential further Covid-19-related challenges and continue to invest in targeted growth opportunities. The Joules brand’s awareness and health metrics have never been stronger, and I firmly believe that, underpinned by our strong brand purpose, Joules is more relevant than ever before.”
Looking to the next few months, the retailer says macro-economic uncertainty looks set to continue across its key markets, which will have an inevitable impact on consumer confidence and spending.
Across its portfolio of 128 stores, a large proportion are in ‘lifestyle locations’ and more than a third have a lease event within the next 18 months. Joules says it will continue to review the “appropriate shape of our store portfolio and lease agreements” and may look to relocate or close around 15 of these stores.
Emily Salter, retail analyst at GlobalData, says after an unusually muted first-half and troubled Christmas trading period, Joules was denied a chance to bounce back as the impacts of the Covid-19 outbreak significantly impacted its main markets (the UK, Germany and the US).
“Joules is more protected from the effects of prolonged store closures by its high online penetration, with online sales through its own channels increasing by over 11% in FY2019/20 and online demand from the start of lockdown to the end of the period being over 40% higher than the comparable period last year. Although this will have been aided by discounting, it proves the strength of Joules’ brand identity.
“The retailer has taken steps to reduce costs and mitigate the impacts of Covid-19 as it fell to a loss during FY2019/20, including reducing its autumn/winter 2020 inventory commitments and ensuring it has flexibility in its spring/summer 2021 stock, enabling it to adapt to changing consumer demand in an unpredictable environment. Joules will also carry some of its current spring/ summer stock forward to future seasons as its focus on lifestyle products as opposed to trend-led items means its range has more longevity, reducing the need to heavily discount to get rid of products, protecting its brand image. The retailer’s focus on casualwear will also have helped it to drive strong online sales as its products are still in demand, unlike workwear and occasionwear.
“Joules has now reopened all of its stores, with overall performance ahead of expectations as its strong brand identity has tempted shoppers back to stores. It will also have benefited from a significant number of its stores being on high streets, with shoppers more likely to be willing to return to these locations rather than enclosed shopping centres. Despite cutting costs, the retailer is right to invest in a modernisation programme of its UK distribution centre to increase warehouse capacity which will enable Joules to capitalise upon the accelerating shift of spend to online.”