Shares in the struggling high street retailer Joules plunged by more than a third after it issued a profit warning blaming the summer heatwave for plunging sales of clothing such as jackets, knitwear and wellington boots.
The company, whose share price has slumped by 90% over the last year, said it was seeing consumers looking for discount clothes “amid a heavily promotional environment” as overall demand weakens because of the cost of living crisis.
In the five weeks to 14 August trading has “softened materially”. Sales are down 8% year on year in the 11 weeks of its current financial year to date.
Retail margins in the year to date have declined by about six percentage points year on year, as a result of the shortfall of full-price sales and the level of discounting required to engage customers.
Joules, which said it now expects full-year losses to be “significantly below” market expectations, also said that it had begun “positive discussions” with its bank to waive debt covenants.
Its shares plunged 35% in early trading as investors reacted to the latest bad news.
“Just when you thought it couldn’t get any worse for retailer Joules, along comes another devastating profit warning,” said Danni Hewson, a financial analyst at AJ Bell. “Customers have typically preferred to buy its goods if prices are slashed, so its margins have taken a big hit.”
The company said wholesale trading for the Joules brand achieved 10% growth year on year despite delays experienced at US ports. However, its garden trading wholesale business has continued to be significantly affected by the wider slowdown in the home and garden market.
Joules reiterated that it continued to hold “positive discussions” with Next over a £15m deal to take an equity stake and use its technology platform.
Last month, Joules, which has about 130 stores and employs more than 1,000 people, hired KPMG to assist with efforts to improve “profitability, cash generation and liquidity headroom”.
Joules currently has £11m of headroom under its bank facilities and has negotiated an extra £5m to help cope with working capital requirements. The retailer expects to be able to repay its extended borrowing in November and is negotiating waiving debt covenants with its bank lenders.
“The group also continues to have positive discussions with its bank on its medium-term financing, including a review of covenants to enable progress on the previously announced business simplification and cost reduction measures,” the company said.
Earlier this week, Joules announced that Jonathon Brown, a former John Lewis omnichannel director, will become its new chief executive from September.
Brown will replace Nick Jones, who stepped down in May after three years, as the company’s performance continued to plunge.
Joules has been listed on the London stock market since 2016, having been founded in 1989 when Tom Joule began selling clothes from a country show stall in Leicestershire.