Fashion brand Joules is exploring its options, including a possible CVA, as poor current trading has left the retailer’s working capital position “below expectation”.
In a business update to the City this morning (November 7), the embattled fashion retailer said trading for the 11 weeks to October 30 had been below expectations due to “the challenging UK economic environment which has negatively impacted consumer confidence and disposable income” and the milder weather which has affected sales of knitwear and outerwear.
While Joules has £11.4m worth of financial headroom and £25.7m worth of debt, this underperformance has led to £5.6m of that headroom being “trapped cash” (cash held in transit by payment providers) and the retailer has a further £5m in loans falling due.
The retailer said it had entered “advanced discussions with a number of strategic investors,” including founder and product director Tom Joule, “to provide a cornerstone investment in an equity raise”.
It is also in discussion with Joule and its bank in regards to a bridging loan to provide the cash necessary to tap into any further investment.
However, Joules noted “there can be no certainty that any bridge financing proposal will be agreed, nor as to its terms, in which case the Company expects it would be unable to repay” its debts.
As a result, Joules and advisors Interpath Advisory were “continuing to progress alternative options” including planning for a potential CVA.
In terms of current trading, Joules said that margins have improved due to its improved pricing and delivery proposition, but noted that had been offset by the high levels of promotional activity across the market, leaving overall retail margin performance slightly behind expectations.
In terms of trading, Joules said ecommerce sales had softened, while stores were slightly ahead of expectations and wholesale was performing well.
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