After seeing a sharp decline in its stock price, high-street apparel firm Joules has hired advisors.
The share price of the fancy wellies firm, which operates 132 stores as well as 7 concession and franchise locations throughout the UK, has fallen by 76% this year.
A profit alert and cash-flow concerns following a long-lasting shift in buying habits as a result of the Covid epidemic have added to the decrease.
As a result of rising fuel, heating, and food prices, Britons are currently experiencing a crisis in their standard of living, which has caused High Street shops to worry about a further decline in sales.
Today, the retailer—which conducts business online through its website—announced that KPMG, a renowned accounting company, had been brought in to look at ways to strengthen its finances.
The company said that KPMG has been retained to support measures to strengthen its balance sheet and increase profits.
After inflationary pressures depleted the retailer’s cash reserves, KPMG is reportedly considering options, including obtaining new capital, according to the Sunday Times.
‘The group continues to focus on enhancing profitability, cash generation, and liquidity headroom,’ Joules said in a statement today.
It happens after the firm’s CEO, Nick Jones, announced that he would retire in the first half of the next fiscal year.
Like many High Street stores, the company, which was founded in 1989 as a line of clothes and home goods inspired by British country lifestyles, has suffered from a shift in consumer behavior brought on by the Covid lockdowns in 2020 and 2021.
Over the past year, its share price has fallen by almost 90%, with reductions accelerated by profit alert and cash crunch concerns.
In order to “help in this process,” it claimed to have hired KPMG’s debt advising practice.
However, the group stressed that debt levels must be within the bounds of its banking agreements and management expectations.
The statement read: “While the group continues to prudently manage its cash resources over its seasonal borrowing peak, it anticipates having sufficient liquidity to manage its working capital requirements over this time.”
“The organization is making solid progress” in regards to the previously announced core efforts meant to streamline operations and reduce costs in order to increase long-term profitability.
As part of this, the group would “make significant changes to its wholesale operations to focus on fewer, profitable wholesale accounts as well as improve and streamline the firm’s end-to-end product process to decrease costs and shorten lead times.”
Its May trading update saw it warn that ‘challenging’ market conditions and weak consumer confidence have affected recent trading.
Joules added that reduced demand for full-price items had hit profit margins across its own channels, while it said profits would be knocked down by ‘subdued’ demand for home and garden products.
Third-party sales had also been weaker than expected across some key UK accounts, it said at the time.
It comes as footfall continues to be down on pre-Covid levels, according to the latest data from Ipsos.
According to data from today, foot traffic in the UK is still down 19.9% from 2019 levels.
The highest fall was in retail centers, while towns experienced a modest decline (16.8%) compared to cities (19.9%). (21.7 per cent).
In terms of regions, the South East, London, and the Midlands all experienced declines higher than 21.9% compared to 2019. (20.3 per cent).
Joules claimed earlier this year that the nine weeks leading up to the end of January had been significantly impacted by increased expenses and stock interruption.
During the year, revenues increased by 31% and 19% compared to levels from 2021 and 2020, respectively, but Joules recognized that both sales and earnings fell “below the board’s objectives.”
Joules informed investors that it was exercising “cost discipline” in marketing, head office, and capex, disposing “aged and slow-moving stock,” and streamlining wholesale operations in an effort to combat “pressures on profitability.”
The company, which offers clothing, shoes, home goods, and outdoor furniture, reported that performance in the six months ending on November 28 was consistent with earlier projections, with pre-tax earnings of £2.6 million and revenues of £127.9 million.
It had initially enjoyed a strong bounce back from lockdown conditions, boosting profit forecasts in June last year as it benefited from Britons’ desire to get back to nature and spruce up their homes and gardens during the pandemic.
Joules has since been negatively impacted by January’s weaker than anticipated revenue, which it partially attributed to the Omicron variant’s effect on retail foot traffic.
The firm also emphasized how delays in new product shipments caused by problems in the world’s supply chains hurt revenues and gross margin.
Due to delayed supply and customer cancellations, Joules’ wholesale income was lower than anticipated. Additionally, rising freight, duty, and distribution expenses have hurt the company’s gross margin.
It told investors: ‘The board’s base case expectation is for trading for the balance of the year to recover in line with its previously stated expectations, supported by recovering footfall and an improved level of newness in the stock position.
‘The wholesale orderbook for Spring/Summer 22 remains strong and the DC operation is normalizing with delivery times back to standard service levels and productivity improved.
‘Assuming the Board’s base case is met, adjusted [profit before tax] for the full year is not expected to be less than £5million.’