Shares dive for Joules after stake acquisition talks with Next called off
Joules’ shares have been further subdued after it confirmed it is no longer in discussions with Next acquiring an equity stake in the lifestyle group.
The ailing retailer’s share price was down around twelve per cent in early afternoon trading on Wednesday, following an announcement the day before.
Shares were down by 33 per cent on Wednesday afternoon.
In a statement to the London Stock Exchange on Tuesday, Joules confirmed discussions with Next on an equity stake had ceased.
However, the retailer said “discussions regarding Joules potentially adopting the Next Total Platform in the future will remain ongoing.”
It acknowledged an “ongoing positive relationship” with Next, with Joules products “successfully” sold through Next’s Label channel set to continue.
At the start of September, Joules hit back at reports that talks over the £15m rescue deal had soured, claiming it had been having “positive discussions” about a “potential equity investment.”
Sky News had previously reported the high street giant had not received enough financial information to make a formal proposal, with questions raised about whether it would proceed with the deal at no less than 33p a share.
A source told Sky News that there was “no way” Next would pay a premium to invest in the firm.
In a trading update last month, Joules’ bosses said they were bracing for a “significant loss” in profit in the first half of this year, as inflation and the summer heatwave hit sales.
While the company expects its finances to improve in the second half of the year, Joules is expected to report a pre-tax loss for the whole year.
Joules will need to “quickly secure a new cash lifeline if it is to strengthen its balance sheet,” Neil Shah, executive director of content and strategy at Edison Group, warned.
“Joules could follow the likes of AO World and execute a rights issue raise by allowing existing shareholders the opportunity to buy a set number of new shares in the company,” he added,
On Total Platform, Shah said there was “a significant opportunity for Joules to grow its revenues without the capex costs, which is a sensible move to strengthen their cash flow.”
Next opting to swerve a stake in the firm was representative of “the highly uncertain time ahead with consumer spending,” Shah added.
“Potentially taking a stake in Joules creates an unnecessary distraction for the company right now, and the likelihood is that they can revisit it potentially at a better price/view on valuation in a years’ time.”
Joules has attempted to lure in customers with discounting amid the shortfall of full price sales, as Brits spend less on non-essential items as a recession in the UK looms.
The retailer has previously said discount-hungry consumers had intensified pressures on margins.
Shoppers have been hunting for reductions amid monster hikes in energy and fuel bills, with Joules citing a “heavily promotional environment.”