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Joules warns on profit after stock error

Demand for its products grew, but problems with stocking will lead to profit falling significantly below expectations
Joules warns on profit after stock error

Between a December election, falling high-street footfall and the ongoing burden of business rates, UK retailers have not been short of valid excuses for poor performance over the Christmas period. Disappointingly, however, Joules' (JOUL) profit warning was not due to any of these issues, but a failure entirely of its own making.

IC TIP: Hold at 177p

The clothing brand had been one of the sector’s stronger players, integrating its online and high-street operations smartly in a way that had helped it weather the challenges on the high street. Indeed, traffic to the group’s website was up 8 per cent in the seven-week period to 5 January, but “an internally generated stock availability issue” hampered trading in the online business, leaving retail sales down 4.5 per cent on the prior year and prompting management to warn that underlying profit for the year to May 2020 would fall significantly short of market expectations.

Management said it has identified and addressed the root cause of the disruption, but the market reaction has been unforgiving. The shares are down more than a fifth following the announcement. House broker Peel Hunt cut forecasts for adjusted pre-tax profit by 38 per cent to £10.5m.