Joules e-tail surge beats forecast, firm is upbeat despite annual loss
Joules issued an update on Tuesday and said it saw “strong e-commerce demand during Q4” that was actually better than it had expected. And the business is “well positioned to navigate existing and potential Covid-19 challenges”.
Its financial year to May 31 endured a perfect storm in its final quarter as the March to May period saw all of its stores closing and those of its wholesale partners shutting as well in its domestic market. Its key international markets, Germany and the US, also saw high levels of disruption so e-commerce was its saving grace during the period.
And that really is significant. The company had modelled various trading scenarios based on how strong e-tail demand would be, but in the event, it found that e-commerce was well ahead of its expectations. In fact, e-sales rose more than 40% year-on-year. Added to this is the fact that the company’s collection of wholesale receivables was better than previously anticipated.
Given this outcome, and the firm having opened 12 of its stores on Monday as part of a gradual comeback, it’s relatively upbeat that it can get back to the kind of performance it was recording pre-pandemic.
Not that its pre-crisis performance was perfect as it suffered well-publicised stock issues over the late AW19 and Christmas trading period. But these issues were more about it being unable to meet demand than any falling off of interest in the brand. And overall, the Joules label continued to expand during FY20 with its customer base rising.
And Friends of Joules, its new digital marketplace that launched towards the end of 2019, has “performed very well, with sales and customer engagement surpassing initial expectations”. Customers have “responded positively to the complementary range of products - from more than 200 independent sellers - that are now integrated into our online platform,” it said.
But those stock issues and the pandemic still meant the balance sheet was in the red for the year. Group revenue in the 12 months was £191 million, a 12% drop, with retail sales of £146 million. Sales were down 20% in stores and up 5% online (with its own webstore up 11%). Wholesale, which was also heavily impacted by the effects of Covid-19, was down 26% to £42 million. It all means that underlying pre-tax profit for the year is expected to be a loss of between £2 million and £3 million.
And what of the future? It seems to be in a reasonably good place. On stock management, Joules said it has “worked collaboratively with its product suppliers to reduce its AW20 inventory commitments and to add greater flexibility to the SS21 inventory commitments. This will enable the business to adjust the value of its stock purchasing closer to the season when management anticipate having better visibility of trading conditions”.
It took action to shore up its finances and as a result of this, plus the better than anticipated trading during the period since lockdown, it ended FY20 with net cash of £4 million and headroom of £53 million against committed borrowing facilities. This is “ahead of its Covid-19 base case scenario and significantly ahead of its downside scenario,” it explained.
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