Joules enjoys strong first half, says it's ready for Brexit

By

Sandra Halliday

Published
Dec 5, 2018

The “strength of the Joules brand and flexible 'total retail' model [will] deliver first-half profits ahead of initial expectations.” That was the headline statement on Wednesday as fast-expanding Joules released a trading update that showed it shrugging off the problems currently besetting the UK fashion retail sector.

The lifestyle brand said that in the 26 weeks to November 25, group revenue soared 17.6% to £113.1 million, with its international growth helping as revenue outside the UK rose to 16% of its total compared to 11.3% a year ago.

Retail and wholesale revenue figures in the period were impacted by the transition of some UK wholesale accounts to a retail concession model (“a model that provides greater future trading flexibility,” we’re told). But that was a minor issue in the grand scheme of things and the company provided us with ‘approximate revenue growth’ figures excluding the impact of this transition, for comparative purposes, with the numbers looking impressive.

As mentioned, group revenue rose almost 18% and the approximate comps growth figure was 14%. Retail revenue rose 21.2% to £79.9 million, or 10% on the comps measure, while wholesale rose 8% to £32.5 million, or 26% comparable.

E-TAIL IMPORTANCE

The importance of e-tail to the company showed just how well it's exploiting omnichannel opportunities. E-commerce performed "particularly well" in the first half and now represents nearly 50% of all retail sales and the company said that its “integrated cross-channel ('total retail') model is well suited to meet changing consumer shopping behaviours.”

Wholesale got a boost from “continued strong growth in our target international markets, the US and Germany, and good UK performance, in line with management expectations.” International sales now represent around half of total wholesale turnover, reflecting the continued expansion of the Joules brand overseas. The company also sells its products in France.
 
Given all of the above, Joules is expecting underlying pre-tax profit to be slightly ahead of initial expectations for the period.

But the firm is also well aware of just how challenging the environment is out there and added that “trading conditions in the UK will remain challenging over the near term, with continued macroeconomic uncertainty, rapidly changing consumer shopping behaviours and a highly competitive environment.”

It said contingency plans have been put in place "to mitigate the expected disruption that could arise in the event of a hard Brexit." These plans include establishing an EU-based third-party distribution facility; scheduling earlier inbound product deliveries for its SS19 ranges; preparation for expected increased administrative activities; and hedging US Dollar requirements more than 12 months forward.

With those plans in place, CEO Colin Porter was upbeat: "I am delighted to update on what has been another period of strong performance for Joules despite challenging trading conditions. In the UK, our 'total retail' cross-channel model, underpinned by investment in infrastructure, has proven to be well suited to today's rapidly-changing consumer shopping behaviours. We have an outstanding brand, good momentum and a growing customer base and we look forward to the second half of the financial year with confidence."