12 months of trouble – the road to saving Joules
Next’s £34m rescue of Market Harborough-based Joules on Thursday (December 1) marked the end of 12 months of strife for the lifestyle retailer.
Next’s swoop for Joules saved almost 1,500 jobs, with only 19 stores set to close, and brought an end to a year in which Joules turned from one of the darlings of the high street to a company desperately scrambling for its future.
Next will be seen a safe pair of hands. The move marks the second major deal for the Enderby firm in two months, after it snapped up stricken furniture retailer Made.com
Joules’ woes started on December 14 last year, when it issued a profit warning after suffering from supply chain issues, a labour shortage and higher costs during the first half of its financial year.
The same day, Joules’ share price fell by 27% on early trading, with investors spooked by the profit warning issued to the London Stock Exchange.
The new year brought little respite as the firm issued its second profit warning in three weeks on January 2, again citing supply chain issues and the (then) new Omicron variant pushing down footfall in its stores. Again, that morning, the firm’s share price crashed, dipping to 70p.
On February 8 this year came more bad news. In the 26 weeks to November 28, Joules saw profit before tax fall from £3.7m to £2.6m, despite revenues rising by 35% to almost £128m.
Joules put this down to the end of government Covid support, increased wage costs because of a labour shortage in its third-party distribution centre and increased digital marketing costs, which saw operating expenses rise by almost 53% to £52.2m.
By May, Joules was reeling again, with the news that Nick Jones was set to step down as CEO after three years at the helm. At the same time, the company said market conditions had become “more challenging” – with the rising cost of living blamed.
Come August, and The Sunday Times was reporting that Joules had called in KPMG to help with shoring up its cash position. The firm’s share price was now reaching as low as 33p.
However, later that month, a rare bright spot. Joules revealed that it had landed a further £5m of debt from Barclays and that it expected its full year adjusted profit before tax to be slightly ahead of expectations.
By August, Joules was in talks with eventual saviour Next over a £15m deal that would see the Enderby retail giant take a 25% stake in the business. Meanwhile, former Coca-Cola man Jonathon Brown was named as Joules’ new CEO.
Another profit warning followed later that month – enough for Next to abandon their planned investment.
While a CVA had been mooted, Joules finally called in administrators from Interpath Advisory in November, while South Africa-based Foschini Group mulled a rescue bid.
On Thursday, Next made a last-minute, successful bid for Joules, saving hundreds of jobs in time for Christmas.
However, the deal has failed to excite Next investors, with the firm’s share price barely causing a ripple on the markets.
Russ Mould, AJ Bell investment director, told TheBusinessDesk.com: “The deal doesn’t mean that much. It’s a £34 million acquisition by a company with a market cap of more than £7 billion and forecast annual sales of £5 billion – it doesn’t really move the dial and Next was already selling Joules clothes on its website.
“What the deal does, therefore, is it keeps the brand and those sales on site and maintains the range of product on offer at Next, in keeping with their plan to add brands and breadth. But the muted share price reaction ultimately tells you all you need to know.”