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December 14, 2021

Joules shares tumble on FY profit update

Shares in Joules were down by more than 22% this morning (14 December) as the British lifestyle brand said full-year profit before tax and adjusting items is now expected to be below current market expectations.

By Beth Wright

In a pre-close trading update for the 26-week period ended 28 November, Joules said global supply chain challenges are expected to remain during at least the second half of its financial year and will impact full year profit.

As a result, Joules expects full-year profit before tax and adjusting items to be below current market expectations and in the region of GBP9m-GBP12m (US$11.9m-$15.9m).

The profit update comes as Joules said customer demand remained strong in the first half, resulting in group revenue increasing by 35% to about GBP128m from GBP95m a year prior.

The performance reflects continued growth in active customers to 1.9m.

Joules cited a strong revenue performance from its stores, up 80% against the prior year. Store revenue was 3% behind the comparable pre-pandemic period two years ago despite lower high-street footfall. This performance reflects the attractive locations of the Joules store estate as well as the opening during the second half of FY21 of five Center Parcs locations, which have performed particularly well, the company said.

E-commerce grew 14% and 54% on a two-year basis. The performance benefitted from the acquisition of Garden Trading and the performance of third-party e-commerce partners.

The group said, however, global supply chain issues have resulted in some higher costs and stock delays, while labour shortages in its third-party operated distribution centre (DC) have led to extended product delivery times to online customers, stores and wholesale partners.

“These factors were particularly acute in November, including the Black Friday period, which alongside weaker year on year online traffic contributed to performance during this month being below expectations,” it said.

Global supply chain challenges are expected to remain during at least the second half of the group’s financial year, with Joules pointing to increased consumer uncertainty as a result of the emergence of the Omicron coronavirus variant.

“Supported by a strong stock position and wholesale orderbook, actions that have been taken to improve productivity at the DC, and the ongoing strong customer demand for the group’s products, the board is confident that the group will achieve continued strong revenue growth in H2 and an improved profit performance,” it said.

“Nevertheless, full-year profit before tax and adjusting items is now expected to be below current market expectations and in the region of GBP9m-GBP12m notwithstanding any further significant covid restrictions.”

CEO Nick Jones added Joules has achieved good revenue growth in the first half against the prior two comparative periods reflecting the strength of the group’s flexible model.

“Alongside the strong appeal of our core Joules brand, the group continues to benefit from its increased diversification through Friends of Joules and Garden Trading, both of which continue to give customers even more reasons to shop with us.

“While we have not been immune to certain industry-wide pressures including supply chain disruption and cost inflation, we remain focused on delivering the group’s long-term growth strategy. We have continued to invest in the business to support our plans and, despite the high levels of near-term consumer uncertainty, we remain very confident in achieving the group’s exciting future potential.”

Joules expects to publish its interim results on 1 February 2022.

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