We’ve seen casualty after casualty on high streets and in shopping malls up and down the country, as one retail chain after another has either collapsed or admitted it’s struggling.
The UK’s consumer spending downturn has been going on for more than two years now and all the signs are that it’s unlikely to turnaround any time soon. As household names from House of Fraser to HMV close shops and adopt a new slimmed-down strategy, the official figures show that things haven’t been this bad for retailers for the past 25 years.
While the likes of BHS and Toys R Us have bitten the dust, along with Mothercare, to name just three, plenty of others are now running drastically smaller operations or have morphed into online-only retailers.
We thought it was bad when retail stalwarts like Marks & Spencer and John Lewis started to feel the chill. But just last week Joules Group (JOUL) the fashionwear retailer sent shockwaves through the sector when it issued a profit warning and said sales over the Christmas period had fallen short of expectations.
Joules’ shock announcement is worrying for two main reasons. Firstly, because the all-important Christmas trading period usually provides a life-line for retailers who’ve experienced a dismal time the rest of the year. But it obviously failed to deliver the goods this time around.
And secondly, because Joules was one of the retailers that was - up until now - defiantly bucking the downward trend; seeing sales rise and opening new stores rather than closing them. In fact, Joules, Hotel Chocolat and online fast-fashion retailer Boohoo, have long been lauded as the three shining examples of 21st century retail success.
Celebrating its 30th birthday in 2019, Joules, the coloured wellies to macs brand was showing not just how to stylishly side-step the British weather, but also the UK eco-political climate too. With a significant online business and a presence across Europe and into the United States, it was achieving what so many others in the sector were failing to do.
But that all came to a screeching halt when it said last week that profits would be 'significantly' below market expectations of £16.7 million, as sales over the Christmas period had fallen short of expectations. And looking ahead, the company said it expects second-half costs to come under pressure too as a result of the US-China tariffs.
So, what does that mean, both for Joules and the rest of the retail sector? If the sector’s few bright stars start to dim, what does that mean for the beleaguered high street. We’ll find out more when Joules posts half-year results on Tuesday.
When it comes to its share price that all-time high in June 2018 feels like decades ago. Joules’ share price has plummeted since last week’s profit warning, falling back to 175p; just a few pence higher than where it started when it came to market in June 2016.
Has all the downside already been priced in then? Brokers seem to think so. Peel Hunt and Liberum Capital were quick off the mark with buy recommendations, but they did also swiftly revise down their price targets too from the 400p they both had them at, to the 250-260p range.
Five year performance
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Source: FE, as at 16.1.20, in local currency terms with income reinvested
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