Shares in struggling high street retailer Joules fell 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 fallen 90% over the past year, said it sees consumers looking for discount clothing “in a strong advertising environment” as overall demand weakens due to the cost of living crisis.
In the five weeks to August 14, trading has “declined significantly”. Sales are down 8% year-on-year in the 11 weeks of the current financial year to date.
Year-to-date retail margins have fallen by around six percentage points year-on-year, due to a lack 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 it had started “positive discussions” with its bank to waive debt covenants.
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 comes another devastating profit warning,” said Danni Howson, financial analyst at AJ Bell. “Customers have generally preferred to buy their goods if prices have been cut, so their margins have taken a big hit.”
The company said wholesale sales for the Joules brand achieved 10% year-on-year growth despite delays at US ports, but its wholesale garden business continued to be significantly impacted by the broader slowdown in the home and garden market.
Joules reiterated that it continued to have “positive discussions” with Next over a £15m deal to take a stake and use the technology platform.
Last month, Joules, which has around 130 stores and employs more than 1,000 people, hired KPMG to help with efforts to improve “profitability, cash generation and liquidity”.
Joules currently has £11m of headroom under its bank facilities and has negotiated an additional £5m to help deal with working capital requirements. The retailer expects to be able to repay its extended loans in November and is negotiating to waive debt covenants with its bank lenders.
“The group also continues to have positive discussions with the bank on its medium-term funding, including a review of agreements to enable progress on the previously announced business simplification and cost reduction measures,” the company said.
Earlier this week, Joules announced that Jonathon Brown, formerly John Lewis omnichannel director, will become its new chief executive from September.
Brown will replace Nick Jones, who resigned in May after three years as the company’s results continued to plummet.
Joules has been listed on the London Stock Exchange since 2016, having been founded in 1989 when Tom Joule started selling clothes from a display stall in the Leicestershire countryside.