Joules defies retail gloom with solid festive sales

Lifestyle brand Joules defied the retail gloom on Tuesday as it said it continued to trade well over the festive period, putting it on course to achieve its pre-tax profit expectations for 2019.

In an update for the seven weeks to 6 January, the company said retail sales rose 11.7% compared to the same period a year ago, reflecting growth across all of its product categories. This marked an acceleration from the 10% growth seen in the first half.

Joules highlighted a "particularly strong" performance online, with e-commerce representing almost half of total retail sales during the period. This was driven by a good performance through Joules' own digital channels as well as through concession partners' websites.

The company said its performance over the Christmas period supports its previously stated confidence in the group achieving full year 2019 profit before tax in line with its expectations.

Chief executive officer Colin Porter said: "I am pleased to update on a continued strong retail performance for Joules through the important festive trading period, which represents an improvement from the retail sales growth in the first half of the year. This good growth was achieved despite the ongoing backdrop of challenging sector trading conditions.

"The group's performance was again underpinned by the strength of the Joules brand, our growing and loyal customer base, and the flexibility of our 'total retail' model which continues to enable Joules to adapt to changing customer shopping behaviours."

Liberum reiterated its 'buy' rating on the stock and 420p price target, saying it expects continued double-digit top line momentum over the long term to be complemented by the capture of operation leverage from the group's well-invested infrastructure.

"Following the sector's de-valuation and deterioration in the outlook on many retail firms across the sector, we believe the share price fall in Joules is unwarranted. Joules now trades on an FY2 EV/sales of 0.9x, an EV/EBITDA of 7.6x, an 11% discount to the wider sector that includes the likes of Debenhams and Superdry who drag the average down.

"Joules currently trades on an May 2020 (FY2) PE of 15.0x, a 20% discount to the clothing & apparel average, which we do not think is fair value, considering both today’s excellent update, and an H1 trading update (which included November) that was ahead of market expectations."

At 1050 GMT, Joules shares were up 5.9% to 259p.