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Energetic Joules ups earnings

Retailer confident on UK earnings and is working on US/Germany expansion
July 23, 2019

Clothing retailer Joules has shown the merits of its big spending in 2018 by posting higher full-year profit, with turnover from its e-commerce division overtaking store revenue. Improved efficiencies resulted in a reduction in trade/receivables as a proportion of revenue, while net operating cash flow doubled to £19.1m. Not every metric has gone its way; return on invested capital (ROIC) fell from a high of 39 per cent in the 2017 financial year to 30.5 per cent in the most recent 12 months. Gross margins were also down due to the increased proportion of online and concession sales, the company said.    

IC TIP: Buy at 260p

The company has committed to further expansion overseas after a 43.5 per cent year-on-year non-UK revenue increase to £35.1m. It signed up to Stitch Fix, which picks out clothing for customers in the US, and made a tentative step into Dubai. However, a strategic move to set up concessions inside department stores has yet to show its full potential. These numbered 35 as of May 26, compared to five at the previous financial year-end. The move may have upped sales costs but it provides “greater future trading flexibility”. 

Outgoing chief executive Colin Porter said the company’s “carefully managed product extension strategy” had kept it growing in a challenging retail environment. The appointment of Nick Jones from Asda could see this strategy change but Mr Porter is staying around for the transition in September.

Bloomberg consensus forecasts point to pre-tax profits and EPS climbing to £17m and 14.4p, respectively, for the May 2020 year-end, rising to £19.5m and 16.2p in FY2021.

JOULES (JOUL)   
ORD PRICE:260pMARKET VALUE:£ 228m
TOUCH:250-26012-MONTH HIGH:357pLOW: 202p
DIVIDEND YIELD:0.8%PE RATIO:22
NET ASSET VALUE:59.4p*NET CASH:£5.8m
Year to May 26Turnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20151160.9-0.5nil
2016131-1.2-2.0nil
20171578.97.31.8
201818611.29.92.0
201921812.911.62.1
% change+17+15+17+5
Ex-div:24 Oct   
Payment:14 Nov   
*Includes intangibles of £16.9m, or 19.2p a share