The Joules share price was stable on Monday (August 22) after dropping almost a third at the end of last week.
The Leicestershire-headquartered fashion retailer – which has had a tough 2022 – issued a profit warning on Friday after the heatwave, coupled with the cost-of-living crisis, caused a drop in sales of staples such as jackets, raincoats, knitwear and wellies.
It said: “As a result of the recent softness in trading and the current weak consumer sentiment….the board expects a significant loss in the first half, followed by an improved performance in the second half as the benefits of business simplification begin to be realised.
“In light of this, the board currently expects the group to deliver a full year loss before tax, and before adjusting items, significantly below current market expectations.”
Joules shares were up pretty level this morning at 27p. Last Thursday they had been trading at around 44p, while back in June last year they had been around £3.
The business said discussions with Next, which is interested in taking a £15 million stake in Joules, were ongoing, though there was no certainty that anything will come of it.
If anything, the big drop in Joules’ value could mean Next – also based in Leicestershire – would get an even bigger share of the business for its investment.
Danni Hewson, a financial analyst at online stockbroker AJ Bell financial, said: “Joules is best known for its posh wellies and very few people will have wanted to make such a purchase when the sun is shining.
“The very hot summer also means its raincoats and knitted jumpers are collecting dust on the shelves.
“Furthermore, its home and garden products have suffered because households spent so much money on such items during the height of the pandemic that people simply don’t need to upgrade what they already have in the back garden.
“This hit to earnings has come at a terrible time for Joules given it is already experiencing debt pressures. News that it expects to require a waiver of certain covenants on its debt facilities is a major worry, and means Joules needs to speed up talks with Next over a possible equity investment.
“Next is thinking about spending £15 million on a stake in Joules, extending a strategy that has already seen it take equity positions in other retailers including Reiss and Gap UK and getting them to use its Total Platform e-commerce system.
“Joules said on 7 August that the investment would be done at a minimum of the market price.
“Given its share price has today [Friday] fallen by 35 per cent, it would mean Next gets a much bigger slice of the company if it were to spend the full £15 million.”
Joules is bringing in former Compare The Market chief executive Jonathon Brown as its next boss.
He will take over the role from Nick Jones, who revealed plans to leave the business in May.
