Cautious consumers and low footfall dent Joules
Usually buoyant Joules updated the market on Thursday as the coronavirus measures and the reaction to them continue to dent UK fashion retail. The company said that in the weeks since its half-year results were released on January 21, its key retail channels have performed “in line with expectations”.
But given that many companies’ expectations have been scaled back, that's not necessarily good news. The company went on to say that the coronavirus outbreak in the UK has led to a decline in store footfall and revenue "which has significantly accelerated over recent days". The firm’s e-commerce channel has also been hit, although to a lesser extent, "as consumers have shown increasing caution with their disposable income". These trends are also likely to be hitting its sales to its concession and wholesale trading partners in the UK and internationally.
But while the company knows that these trends will continue to affect it in the coming months, it doesn't feel that it has enough clarity to be able to issue any guidance.
One positive note was struck as it said the brand has “demonstrated its strength, with consumer awareness at its highest-ever level of 46.4%, up 4.6ppt on the prior year, and Joules' brand health score also reaching record levels as measured by YouGov's monthly survey”.
But consumer awareness is clearly not enough in extreme circumstances and the company said it’s “taking prudent actions to manage the near-term challenges whilst ensuring the business remains well positioned to deliver its long-term growth plans. These actions include removing cost and non-critical capex from the business”. The board has also decided to cancel the proposed interim dividend and that will save it £700,000 in cash.
Again, as with other businesses, that leads us to ask whether cash flow is likely to be a problem in the months ahead. But the company said it has a £16 million “cash headroom, a strong relationship with its bank, Barclays, and a supportive founder and major shareholder, Tom Joule”.
It’s continuing “to plan for multiple scenarios and explore various ways to mitigate the impact of reduced demand for a potentially extended period of time”.
And it added that while government measures so far or to be welcomed, it strongly echoes the position of the British Retail Consortium and other senior retail leaders that "more urgent action is needed to provide support to those working in retail during these challenging and uncertain times”.
CEO Nick Jones added: "The challenges that all retailers are currently facing are unprecedented in modern times. Our immediate and over-riding objective is to ensure the wellbeing and protection of our colleagues and our customers. Our teams continue to demonstrate a flexible, can-do attitude during this testing time.
"While the group's near-term profitability will be impacted by the sector-wide effects of Covid-19, the board is remaining focused on protecting long-term value for its stakeholders and managing the near-term pressures on the business. We have an outstanding, unique brand and a fantastic team. I am very confident that Joules will successfully emerge from this very difficult period in a position to continue to deliver its exciting long-term growth plans."
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