Joules raises FY profit guidance as cost cuts bear fruit

Clothing and homeware brand Joules has revealed it expects FY22 adjusted profit before tax and adjusting items to be “slightly ahead of current market expectations” as its additional cost reductions begin to bear fruit.

It revealed the trading trends outlined in the group’s previous update have also continued for the first six weeks of FY23 with retail sales growth of 8.5% year on year. It added that gross margins have also remained under “significant pressure” with consumer appetite weighted towards mark downs amidst “a heavily promotional environment”.

However, it added the group is making good progress on its plans to improve profitability by simplifying the business and optimising the cost base. This included implementing the group’s previously disclosed plans to reduce its global wholesale accounts to focus on long-term profitable partnerships, shorten product lead times, and diversify the group’s ethically sourced supplier base.

As part of the trading update, the group also revealed it has secured in additional £5m headroom on its borrowing facilities with Barclays Bank until November 2022 to support working capital requirements over the group’s forthcoming seasonal borrowing peak.

As at 26 June, the group had net debt of £17.7m, giving £15m headroom within its current banking facilities, in line with the board’s expectations.

As part of the additional headroom being made available, Joules said it is anticipated that it will grant additional security to Barclays. The group will also be restricted from paying dividends for the period that the facility is in place.

It said: “The group is continuing positive discussions with Barclays on the group’s medium-term financing which the board expects to conclude by September 2022. Whilst the group will continue to manage cash resources carefully, the board expects that the group has sufficient liquidity to manage its working capital requirements over this time.”