Growing a successful e-commerce business is taking a bite out of margins at clothing chain Joules (JOUL). However, this shouldn’t distract from a solid set of half-year numbers. Half-year revenues rose by nearly 18 per cent to £113m, with retail sales up 10 per cent on an underlying basis when adjusted for the transition of two wholesale accounts into retail concessions.
E-commerce sales did particularly well – and now account for more than 46 per cent of all retail sales – which helps explain the squeeze in retail gross margins. While a higher mix of online sales is dilutive to gross margins, digital sales carry a higher operating margin thanks to fewer physical overheads such as rent charges and staff costs. Chief financial officer Marc Dench says operating margins are also down due to the wholesale transition, but the benefit of higher e-commerce sales should be evident at the operating level this time next year.
Top-line momentum also continued over the festive trading period, with sales up nearly 12 per cent over the seven weeks ended 6 January 2019, leading broker Peel Hunt to maintain forecasts for pre-tax profits of £14.8m for the year ending May 2019, giving EPS of 13.4p (from £13m and 11.8p in FY2018).
| JOULES (JOUL) | ||||
| ORD PRICE: | 255p | MARKET VALUE: | £224m | |
| TOUCH: | 251-261p | 12-MONTH HIGH: | 393p | LOW: 202p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 56p* | NET CASH: | £4.3m | |
| Half-year to 25 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 96.2 | 8.3 | 7.3 | 0.70 |
| 2018 | 113 | 9.3 | 8.3 | 0.75 |
| % change | +18 | +12 | +13 | +7 |
| Ex-div: | 07 Mar | |||
| Payment: | 09 Apr | |||
| *Includes intangible assets of £14.6m, or 17p a share | ||||
