Joules interim profits and revenue rise

Clothing retailer Joules posted a rise in first-half profit and revenue on Wednesday despite a challenging backdrop, but margins fell.

In the 26 weeks to 25 November, underlying pre-tax profit increased 14.7% to £10.7m on revenue of £113.1m, up 17.6% from the same period a year ago. International revenue, which now accounts for 15.8% of group sales, was up 64.2% to £17.8m, while revenue in the UK rose 11.7% to £95.3m.

Retail sales were up 10% to £79.9m, while wholesale sales increased 26% to £32.5m.

However, gross margin came in at 54.8%, down 80 basis points from the first half of the previous year. Retail gross margin was hit by the increasing mix of e-commerce sales, which have a lower gross margin than store sales, but deliver a higher operating margin, and by increased levels of new customer acquisition activity in the period. E-commerce sales now represent 46.5% of all retail sales, versus 35.8% in the first half of 2018.

Active customer numbers were up 20% to 1.4 million and the company said retail sales in the seven weeks to 6 January 2019 were 11.7% higher.

Joules reiterated its confidence in achieving full year 2019 underlying pre-tax profit in line with its expectations.

Chief executive Colin Porter said: "Joules has delivered another strong performance in the first half of year. As previously reported, this outcome is ahead of our initial expectations for the period and has been achieved despite challenging trading conditions.

"The business's success during this first half of the year is testament to the strength of our distinctive brand and the efforts of our fantastic team. We continue to benefit from a well-invested and flexible 'total retail' model in the UK, which enables us to respond and adapt to shifting customer preferences. Internationally, the brand continues to grow very well in both the US and Germany."

Porter said the group has continued to trade well since the period end, with a good performance through the festive period and positive customer reactions to its new collections.

"We have an outstanding brand, good momentum and a growing customer base and we look forward to the second half of the financial year with confidence," he said.

At 1010 GMT, the shares were up 0.4% to 260p.

Peel Hunt said pre-tax profit was slightly ahead of its upgraded forecast of £10.5m.

"Short-term trading aside, we continue to see significant upside to medium term EBIT margins and international growth prospects, Joules continues to outperform, as a strong product file and high levels of customer engagement is backed up by a well invested infrastructure and flexible, multi-channel model.

"US growth potential remains exciting. Trading on 8x EV/EBITDA and offering circa three-year compound earnings per share growth of 20%, we reiterate our buy stance."