Joules Group (JOUL): down 40%


I’m not a holder, but Joules had a crash this morning (-40%).

I’ve seen this companies hyped by a few tipsters and I used to hold until they purchased the garden-ware business, at which point I (fortunately) thought they were outside of their zone of competence and it was an example of diworsifying.

Sorry for any holders, today, though. It seems very unfair.

14 Dec 21 RNS

Nevertheless, full year profit before tax and adjusting items is now expected to be below current market expectations and in the region of £9m to £12m notwithstanding any further significant covid restrictions.

1 Feb 22 RNS (today)

Assuming the Board’s base case is met, adjusted PBT for the full year is not expected to be less than £5.0m (FY 2021: £6.1m

Operating margin, historically, has been 3.9%. A reduction in profit of 5m (£10.5 being the middle of the £9-12m range from the 14 Dec rns, to £5m), suggests management (very roughly) got predicted sales wrong by over £100m. (to put that into context, 2021 turnover was £199m in total). That seems to be a huge miss to me.

Should investors not expect better forecasting than this, despite the (already mostly known) covid issues? Is it Liberum and Peel Hunt’s responsibility as well, though?

Just fyi, e-commerce represents c. 61% of sales and physical stores 17.5%, with wholesale making up most of the difference.

Reasons given for the reduced profit forecast are;

Weaker than expected revenue in January, in part as a result of the negative impact of the Omicron variant on retail
footfall (down 36% vs. the comparable period two years ago);
• Delays to new stock arrivals as a result of global supply chain challenges, resulting in a lower full price sales mix, in turn
impacting revenue and gross margin;
• Lower than expected wholesale revenue due to delayed stock and customer cancellations;
• The continued impact on gross margin of increases in freight, duties and distribution costs; and
• Continued operational disruption, lower productivity, and higher than expected costs within the third-party operated

Distribution Centre (DC). DC costs for December and January were c.£1.2m above expectations, which is more than double compared to the prior year. In the second half of FY22 so far and post peak trading, wage rates have reduced but are still higher than seen in the comparable prior year period

April 2021 - Tom Lee Joules sold c.13m pounds of shares (5,250,000 shares @ £2.32, share price now 70.5p, around 4% of the company). Small purchases thereafter. He now holds 21.8% of the company.


October 2021, 540k shares (in total) awarded to the CEO and CFO at an exercise price of 1p. i.e. the ones who made such a terrible call on the 14 Dec RNS.

The other thing I noticed was that their IT systems cost £35.3m in total at 30 May 21. It appears fashion companies need to be IT companies and logistics experts as well as experts in their ‘bread and butter’ business. Maybe there is a need for scale, in order to compete effectively in online fashion? Or a need to use Next or Asos, who have scale, rather than trying to in-house these functions.
The company invested £7.5m in IT systems last year. If this is on-going, are they actually making any cash/owners profits? Free Cash Flow is after capex, and cash profitability seems non-existent at present. Maybe the company is investing based on planned future growth. This seems like a large risk to a private investor, though:


  • avoid companies which diworsify, and use debt to do so.

  • review a company if founders sell large amounts of stock.

  • don’t follow tipsters.

  • Be more critical of AIM stocks, because the risk could be higher.

  • avoid fashion retailers? (if they get a season wrong, it is quite brutal).

  • hindsight is easier than foresight!



Hi anon

Thanks for highlighting JOUL. Looks a messy situation.

Does not take much for profits to drop significantly. For instance JOUL highlights distribution costs rising by £1.2m more than expectations just for two months. So for another six months (H2) that is an extra £3m, which when the earlier profit prediction was £10.5m becomes a material hit. Small drops in revenue/gross margin can have a major effect on reported profit, too, as certain operating costs (such as rent, staff, IT etc) continue to be incurred regardless of sales.

Always hard to forecast the future, and investors just have to live with imperfect management projections and should always take their own view. But certain businesses/industries do seem to be more susceptible to adverse events than others. And you can’t rely on brokers. :point_down:

From JOUL’s latest statement:

The Group is in the process of finalising its Interim Results, including completing its going concern analysis, reflecting the impact of trading performance up to the end of January. The Group intends to release its Interim Results as soon as this is concluded.

The half-year results were meant to be published on Tuesday, but shareholders received that trading update instead because more time is required to conduct the ‘going concern’ analysis. Net debt was £21m and profit is now predicted to be at least £5m, so debt is a lot larger than profit and this position is not ideal given the circumstances. Very understandable the going-concern sums are under further scrutiny and the shares dropped by 40%.

PS Good spot with the IT expense! £18m I think is still to pass through the P&L.

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