- Indebted retailer is heading into administration
- Rescue fundraising talks fail
- Shareholders likely to lose everything
Trading in shares of Joules (JOUL:AIM) has been suspended on AIM at a bombed-out 9.2p after the beleaguered clothing and homeware brand said it plans to appoint administrators in a collapse that imperils as many as 1,600 jobs.
Known for its posh wellies, Joules is going into administration to protect the interests of its creditors after talks with potential investors over a rescue equity raise and a bridge financing deal fell through.
Leicestershire-based Joules is the latest UK retailer to collapse amid rising costs, supply chain issues and falling consumer confidence amid an unprecedented cost-of-living squeeze.
Online furniture retailer Made.com (MADE) met its demise last week before Next picked up the brand, website and intellectual property from the administrators for £3.4 million.
RESCUE TALKS TERMINATED
‘The Board confirms these discussions with various parties have not been successful and have now terminated,’ explained Joules in a terse statement.
The retailer’s turnaround efforts have been crippled by the cost-of-living crisis as well as recent milder than expected weather, which arrived at just the wrong time and crimped demand for its jumpers, coats and wellies.
‘Regrettably therefore, the board of Joules has resolved to file a notice of intention to appoint Will Wright, Ryan Grant and Chris Pole of Interpath Advisory Limited as administrators to the Company and Joules Limited, and Will Wright and Ryan Grant to The Garden Trading Company Limited and Joules Developments Limited as soon as reasonably practicable.’
ARE JOULES SHARES NOW WORTHLESS?
Almost certainly Yes, is the devastating answer for remaining shareholders. Administration leaves shareholders out of pocket and in most cases the shares will eventually be delisted from the stock market.
Shares are suspended when a company goes into administration and there are no real options for ordinary investors to trade them beyond this point, even if a buyer is found for part or all the business.
Joules had been in talks with Next over the possibility of the high street fashion giant taking a stake in the company, but discussions over a deal eventually came to nothing.
Even if Next or another deal-hungry retailer such as Mike Ashley’s Frasers (FRAS) buys the brand from the administrators, Joules’ shares will still be worthless.
As Shares explained here, the administrator’s job is to either restructure the business and reach an agreement with indebted creditors, pay the creditors by realising the company’s assets, or sell the business to new owners as a going concern to yield greater returns than if the company was liquidated.
Shareholders are right at the back of the queue behind all the firm’s other creditors and it can take some time for shareholders to find out their fate and for the situation to be fully resolved.
THE EXPERT’S VIEW
Clive Black, retail guru at Shore Capital, described Joules as ‘a remarkable tailspin story that has, frankly, reached a position that has seemed increasingly inevitable in recent times, the application for administration.’
With this news there will be ‘understandable worry for its employers and suppliers. We now await to see how the administration process progresses; will founders re-emerge, could there be trade interest in the brand - or will the brand disappear? Time will tell.’
Black added that the new Joules, ‘should it re-emerge, is likely to be a smaller venture we sense and so represent another notch in UK apparel retail industry capacity reduction, following on from the more major rationalisation by Arcadia and Debenhams that represent a material positive for the rest of the trade, removing surplus capacity and disruptive promotional activity.’
