1st Feb 2022 10:24
(Alliance News) - Joules Group PLC's share price tumbled on Tuesday, after it said revenue in the third quarter of its financial year has been behind management expectations, and its annual profit would shrink by nearly 20%.
The British lifestyle retailer said that in the nine weeks ending January 30, revenue was 31% higher than the previous year, and 19% against a two-year comparative, but was still behind the board's expectation.
Joules' share price fell 41% to 69.80 pence each in London on Tuesday morning.
Revenue had been hit by multiple factors. The emergence of the Omicron variant had hit retail footfall in January, which was down 36% compared to two years ago.
It was also hurt by supply chain shortages, which delayed new stock arrivals. This led to fewer full-price sales, which reduced gross margins. Margins were also hit by increases in the costs of freight, duties and distribution.
Wholesale revenue suffered from the stock delays, in addition to customer cancellations.
Joules' third-party distribution centre performed poorly during the period, with low productivity, continued disruption, and higher than expected costs. In December and January, costs for the centre were around GBP1.2 million above expectations; over double the previous year. Whilst wages rates have been reduced in its second half so far, they are still higher than the previous year.
Joules said the distribution centre is normalising as it continues its second half, with delivery times improving and productivity recovering.
The retailer said results for its first half ended November 28 were in line with expectations, with revenue up 34% year-on-year to GBP127.9 million from GBP95.4 million, and pre-tax pre-adjustment profit down 30% to GBP2.6 million from GBP3.7 million the previous year.
Joules expects trading for the rest of the financial year to recover in line with previous expectations, as stock levels improve and footfall returns to normal levels. It reported a strong wholesale orderbook for its spring and summer collections.
Should recovery go as predicted, Joules predicts an adjusted pre-tax profit for its full financial year of "no less than" GBP5.0 million. This would be an 18% drop year-on-year, from GBP6.1 million in financial 2021.
In response to the current headwinds, Joules has tightened costs, targeting marketing, head office and general capital expenditure. It has also introduced minimum order value requirements in the US, and the cancellation of unprofitable orders.
By Elizabeth Winter; [email protected]
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