Joules has recorded soaring half-year sales as it cashes in on its strong brand and international footprint. What challenges and opportunities lie ahead?
High-profile brand – A quirky brand, Joules has quickly established a higher profile than its size might merit and is now taking advantage of the favourable environment for British lifestyle brands to pursue international expansion.
The latter is taking place through the wholesale and online channels.
Strong management team – The management team has been strengthened at a number of key positions from 2010.
It became clear that the group’s expanding size and complex multichannel nature warranted a review of the management structure, which had become increasingly dependent on the then chief executive and founder of the business Tom Joule.
Particularly significant were the creation of three new roles to head up each of the sales channels: wholesale, retail and direct.
“A quirky brand, Joules has quickly established a higher profile than its size might merit”
In late 2015, managing director Colin Porter took on the chief executive’s role to allow Joule to focus more on the brand and the creative side of things.
The senior team has been further strengthened with the appointment of two key non-executive directors ahead of its admission to AIM in May 2016.
Loss-making in 2015/16 – Investment in infrastructure and systems has put pressure on profits and the business made a £1.2m statutory pre-tax loss in 2015/16.
Staff costs – Despite a slight improvement in 2015/16, Joules’ staff costs to sales ratio remains on the high side at nearly a fifth of sales.
“Success in the US is far from guaranteed and many UK retailers have had their fingers burned in this market over the years”
This is considered an elevated level for a brand such as Joules, which generates a sizeable proportion of sales through the less labour-intensive wholesale and online channels.
Domestic network – With 100 UK stores now in place, Joules has good domestic coverage, allowing shoppers to benefit from click-and-collect and other services such as returns and refunds, which the stores can offer.
It is now committed to opening a further 10 to 12 stores a year across the domestic market in the medium term and has a list of 100 target locations where it believes the brand could trade well.
Its recent flotation will also help the retailer achieve these ambitious domestic targets.
Extension of product offer – While the product offer remains focused on rural clothing for the whole family, its appeal has been broadened of late as a result of the introduction of a range of more tailored clothing and an expanded homewares offer.
Such extensions should continue to drive sales growth and broaden the appeal of the brand across a wider customer base.
Having handed the chief executive reins over to Colin Porter from September 2015, founder Tom Joule is now focusing on getting closer to the customer and their lifestyle and continuing to deliver the distinct Joules brand vision.
Risk of over-expansion – Joules’ quirky branding means that the product is very distinctive, and management needs to remain cautious over the risk of market saturation and potentially alienating its customer base.
The retailer is also opening a number of larger stores in major city-centre locations, which will raise costs across the business.
US market is not easy – Success in the US is far from guaranteed and many UK retailers have had their fingers burned in this market over the years.
Joules’ wholesale-led approach indicates an element of caution though, serving to heighten brand awareness significantly before it decides whether to establish a physical presence through its own stores.