Share boost for Joules as boss warns of ‘severe’ cost increases
Lifestyle retailer Joules saw its shares soar on Tuesday, although it warned of “the severe inflationary cost environment.”
In interim results ended 28 November 2021, the Leicestershire-based company posted a pre-tax profit of £2.6bm. This was double the £1.3m profit in the comparable period last year.
Revenue soared 35 per cent to £127.9m, up from £95.5m the year before.
The retailer’s shares were up more than 10 per cent on Tuesday afternoon, after Joules heralded “a very strong recovery in retail demand to almost pre-pandemic levels.”
However, Nick Jones, chief executive officer, warned that group profitability had taken a hit from skyrocketing costs.
Joules would introduce changes to slash costs and “simplify the business,” Jones said.
Jones said: “While the group experienced strong levels of customer demand that resulted in good revenue growth against the prior two comparative periods, group profitability in the first half was impacted by various factors, most notably the severe inflationary cost environment.”
He added: “While we acknowledge that there are areas within the business where we need to simplify our operations and improve profitability, we remain very excited in our long-term growth prospects.”
The retailer had seen improvements in its brand awareness and customer numbers, the CEO added.
Its brand awareness increased 2.0 per cent to hit record levels while active customers increased by nearly 160,000 in the 26 weeks, surpassing 1.9m.
The delayed results were “as bad as expected,” following recent updates, Nigel Parson, consumer analyst at City broker finnCap group, said.
He added: “It’s been a good first-half from a revenue perspective but current trading is weaker and costs have poured into the business. Strategy has been reaffirmed but we care less about strategy and more about execution and here’s the rub.
“It wants to broaden the offer and develop omnichannel but it also needs to simplify the business, reduce supply chains and refocus on winning customers. Working through this contradiction is not a quick fix.”
Joules’ share price has plummeted 83 per cent since a 2021 summer high of 305p, according to FactSet consensus.
“It may be cheap on historic averages, but we’re not tempted,” Parson said.