Joules Group plc
('Joules' or the 'Group')
Business update and pre-close trading statement
Strong e-commerce demand during Q4 reflecting strength of brand. Business well positioned to navigate existing and potential COVID-19 challenges
Joules, the premium British lifestyle brand, provides an update on its recent trading, financial position and a pre-close trading statement for the financial year ended 31 May 2020 ('FY20') ('Period').
Since early March, the Group has been focused on managing both the immediate and longer-term impact of COVID-19 on the business. The foremost priority throughout this period has remained the safety and wellbeing of colleagues, customers, business partners and communities.
From 23 March until after the Period end, the entire Joules store portfolio was closed alongside the stores of its UK wholesale partners in accordance with UK Government guidance. Trading conditions in the brand's key international markets, Germany and the U.S., experienced similarly high levels of disruption. The Group's UK e-commerce channel has remained available to customers throughout the lockdown period but has operated with constrained warehouse capacity to ensure strict compliance with physical distancing and hygiene guidelines.
Reflecting the material COVID-19 related impact on the Group's operations from mid-March as well as significant uncertainty regarding the near-term outlook, the Board planned for a range of trading scenarios. The Board is pleased to update that e-commerce demand1 from the start of lockdown to the end of the Period was significantly ahead of expectations and was more than 40% higher than the comparable period last year. In addition, over the same period, the Group's collection of wholesale receivables was better than previously anticipated.
The Board believes that this performance during these extremely challenging trading conditions is a testament to the strength of the Joules brand, which it believes is more relevant to its customers than ever, and the substantial investment made in the business over a prolonged period of time.
The Group has taken a significant number of actions to reduce costs and conserve cash throughout the ongoing pandemic disruption. These actions continue to involve the cooperation of many of the Group's key stakeholders including stock suppliers, non-stock suppliers, landlords, and employees and we remain very grateful for their ongoing support.
The Group has worked collaboratively with its product suppliers to reduce its Autumn/Winter 2020 inventory commitments and to add greater flexibility to the Spring/Summer 2021 inventory commitments. This will enable the business to adjust the value of its stock purchasing closer to the season when management anticipate having better visibility of trading conditions.
The Group closed the Period with an inventory position marginally lower than the prior year. The closing inventory balance consisted primarily of current and future season stock and, as previously announced, the Group intends to carry forward a proportion of the current Spring/Summer inventory to future seasons.
In addition to the cash preservation initiatives implemented by the Group, on 3 April, Joules announced a successful equity placing to raise gross proceeds of £15 million. On 21 April, the Group was also pleased to announce the completion of a £15 million increase to its revolving credit facility with Barclays Bank plc.
As a result of these actions, as well as the better than anticipated trading during the period since lockdown, the Group ended FY20 with net cash of £4 million and headroom of £53 million against committed borrowing facilities. The Board is pleased with this cashflow performance, which is ahead of its COVID-19 base case scenario and significantly ahead of its COVID-19 downside scenario. The Board expects that, in line with expectations, this net cash position will reduce over the coming months due to seasonal working capital funding requirements and the repayment of amounts due to HMRC and landlords that were deferred as part of the Group's COVID-19 mitigation actions.
FY20 performance overview
The Joules brand continued to expand during FY20 with brand awareness2 increasing by 2.8ppt against the prior year and brand health2 reaching its highest ever level. The Group's customer base also continued to increase, with 1.43 million active customers3 at the end of the Period. These encouraging metrics continue to underpin the Board's confidence in the significant future growth opportunities for the Joules brand.
The COVID-19 pandemic has highlighted the responsibilities the Group has to positively contribute to the communities where it operates. The Group leveraged its supplier partnerships to source and donate vital personal protective equipment to key workers in addition to launching a specially curated 'Rainbow Edit' collection with profits being donated to the NHS Charities Together Urgent Covid-19 Appeal. To date, the edit has raised almost £55,000.
Friends of Joules, Joules's new digital marketplace that launched towards the end of 2019, has performed very well, with sales and customer engagement surpassing initial expectations. Customers have responded positively to the complementary range of products - from more than 200 independent sellers - that are now integrated into our online platform.
The Group's financial performance in FY20 was delivered against a backdrop of difficult trading conditions in the brand's core UK market and was also impacted by a stock availability issue through the important end of Autumn/Winter season sales period. The impact of COVID-19 on the Group between March and May resulted in a material reduction in revenue and a lower Group gross margin reflecting the channel sales mix and higher promotional activity during this exceptional period. This was only in part offset by the Group's cost reduction initiatives.
Group revenue in the Period was £191 million, a 12% reduction against the prior year (FY19: £218m). Retail sales were approximately £146 million with store sales down approximately 20% and e-commerce sales up approximately 5% (with e-commerce sales through the Group's own channels increasing by over 11%). Wholesale sales, which were also heavily impacted by the effects of COVID-19, were approximately £42 million, a reduction of 26% in the Period.
As previously indicated, the Group incurred approximately £2.5 million of non-recurring costs related to the UK and USA distribution centre transformation programmes to support the Group's long-term growth.
As a result of the above, in line with current market expectations, Group underlying Profit/(loss) before tax4 for the Period is anticipated to be in the range of £(2) to £(3) million.
Post-period events & outlook
The Group continues to believe that its flexible operating model and well-invested infrastructure are well suited to adapt and evolve to meet changing consumer behaviours, whether these are short-term changes or more fundamental and long-term behavioural shifts. The Group will continue to tightly manage its cost base over the coming months until there is better visibility on the speed of demand recovery across its different channels.
On 15 June, Joules re-opened 12 stores after a near three-month period of closure. The Group is proceeding with store re-openings cautiously and has introduced several new hygiene measures in order to keep colleagues and customers safe. The Group expects to re-open its remaining stores on a phased basis over the coming weeks. Whilst it is too early to accurately forecast how quickly and to what extent store footfall and sales will recover, the Board believes that the Group's flexible and agile 'total retail' model puts Joules in a strong position to adapt to the way customers choose to interact with the brand going forward. Across the Group's portfolio of 128 stores, a large proportion are in 'lifestyle locations' and over a third of the store portfolio has a lease event within the next 18 months.
The Group's UK distribution centre modernisation programme is well progressed following the transfer of the operation to Clipper Logistics in March. The Group intends to further increase warehouse capacity over the coming months in order to support e-commerce order volumes whilst maintaining the current physical distancing measures.
The Group's liquidity headroom, together with the proactive actions taken to optimise sales, tightly manage costs and preserve cash, gives the Board confidence that the Group is well positioned to navigate a potentially extended period of subdued customer demand.
Nick Jones, Chief Executive Officer of Joules, commented:
"Whilst this continues to be an exceptionally challenging period for people, communities and businesses, I am delighted with how Joules has responded over recent months. We were quick to adapt to the initial disruption of the COVID-19 pandemic by bolstering our liquidity position, preserving cash and focusing our trading online. We are very encouraged with the significant 40% growth in e-commerce demand during the lockdown period, which is particularly pleasing given the already established scale of our e-commerce operations.
As we move out of lockdown and into a 'new normal' for retail, I am confident that Joules is exceptionally well positioned to continue to react to changing consumer behaviours and that our brand - which brightens our customers' lives - is more relevant than ever to consumers.
Whilst we will continue to face very challenging trading conditions over the coming months, the Joules customer base continues to grow, and I believe the brand is stronger than ever. We are now looking forward to the re-opening of our stores as well as those of our wholesale partners.
I would like to take this opportunity to again thank our amazing colleagues for their resilience and hard work, our loyal customers for their support, and our valued business partners for their flexibility and collaboration throughout this uniquely challenging time for us all."
1 Demand is a is a non-GAAP measure. It states the total sales value (inclusive of sales tax) of customer orders received in the relevant period, excluding any returns received or provision for potential returns
2 Brand Awareness and Brand Health are measured as part of an independent YouGov consumer survey
3 Customer registered on our database who has transacted in the last 12 months. Prior year's restated to reflect improved database matching (FY19: 1.38 million active customers)
4 Underlying PBT is a non-GAAP measure that, to facilitate meaningful comparison across periods, excludes the expense of share-based compensation plans and exceptional items. It is stated prior to the impact of IFRS16 (Leases)
Joules Group plc
Nick Jones, CEO
Marc Dench, CFO
Tel: +44 (0) 1858 435 255
Hudson Sandler (Financial PR)
Tel: +44 (0) 20 7796 4133
Peel Hunt LLP, Nominated Advisor and Joint Broker
Tel: +44 (0) 20 7418 8900
Liberum Capital Limited, Joint Broker
Tel: +44 (0) 20 3100 2000
Joules - a premium lifestyle brand with an authentic British heritage
Established in Britain by Tom Joule three decades ago, Joules is a premium lifestyle brand with an authentic heritage.
The Joules story began in 1989, when Tom Joule started selling clothing on a stand at a country show in Leicestershire. Today, it is a true multi-channel lifestyle brand; its products are available through its e-commerce websites, retail stores, at rural shows and events and wholesale channels both in the UK and internationally.
Joules carefully designs and sells clothing, footwear and accessories for women, men and children. The business also sells ever-growing collections of homeware, eyewear and lifestyle product ranges through both its licensing partnerships and Friends of Joules, the brand's online marketplace that brings together hundreds of creative businesses to give customers everything they could ever need for a contemporary country lifestyle.
The brand's values of quality, Britishness, family and humour, coupled with its unique use of colour and print set Joules apart. This approach, along with an unwavering attention to detail and drive to surprise and delight its customers with unexpected details, has been central to the brand's success and remains at the heart of everything Joules creates.
Joules Fast Facts
• Joules is an international brand, available in the UK, USA, Germany and other international markets
• Joules has a significant online business, operates across 128* stores in the UK and ROI across a range of location types and has a well-established wholesale business with over 2,000 stockists worldwide
• Joules' talented in-house print design team lovingly hand-draw all the prints and unexpected unique details you see within its collections each season
• Joules is proud of its British heritage and still has strong roots in Market Harborough, the site of its first shop and head office - since day one
• Joules' performance has been recognised through a number of awards including:
o Mainstream Brand of the Year - Drapers Awards 2019, 2017 and 2016
o Best Licensed Fashion or Talent Brand Award - Brand & Lifestyle Licensing Awards 2019
o Best Licensed Gifting Product Award - Brand & Lifestyle Licensing Award 2019
o The Best Fashion Retailer (Mark of Excellence) - Retail Week Awards 2019 and 2018
o Fashion Retail Business of the Year (between £101m-£500m turnover) - Drapers Awards 2018 and 2017
*As at 31 May 2020, excluding concessions and franchises (33 concessions and 3 franchise stores)
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