Despite experiencing increased sales, British lifestyle brand Joules has issued a warning regarding its profits. The company reported revenues of £127.9 million for the six-month period ending on November 28, a significant rise from £95.4 million the previous year. However, pre-tax profit before adjusting items dropped to £2.6 million from £3.7 million.

Although the second half of the year showcased strong performance compared to the previous year, it fell short of the board’s expectations. Joules has encountered several challenges that are currently impacting numerous businesses.

One of the main hurdles mentioned by Joules is the negative impact of the Omicron variant on retail footfall, resulting in a 36% decrease compared to the same period two years ago. Additionally, the company has experienced delays in new stock arrivals due to global supply chain challenges. Consequently, there has been a decline in full-price sales, adversely affecting revenue and gross margin.

Joules has also faced lower-than-anticipated wholesale revenue due to delayed stock and cancellations from customers. Additionally, the company has been burdened with increased freight, duties, and distribution costs. Operational disruption, decreased productivity, and higher costs within its third-party-operated distribution center have further compounded the challenges faced.

Nevertheless, Joules has taken proactive measures to address the situation. These include exercising restraint in marketing, head office expenses, and capital expenditure. The company has also liquidated aged and slow-moving stock through outlets and third parties, streamlined wholesale operations, and implemented selective price increases for SS22 in order to accommodate the elevated cost environment.

Although there have been positive developments such as sales growth over the past one and two years, Joules anticipates a recovery in trading performance for the remainder of the year in line with its previous expectations. The wholesale order book for SS22 remains robust, and the distribution center is returning to normal operation with improved productivity.

However, even at the highest end of the projected forecast, Joules expects pre-tax profit for the full year to amount to at least £5 million, down from £6.1 million the previous year. The company maintains a cautiously optimistic outlook for its future prospects but recognizes the ongoing challenges it faces within the current business landscape.

Useful Links:
The Guardian: Fashion brand Joules warns income may fall short of forecasts
Reuters: Joules warns full-year profit may fall below forecasts