Joules Up a Creek, M&S Surviving ‘Stormy Weather’ – Sourcing Journal

Though inflation is far from a country-specific problem at the moment, the UK could be in a state of madness.

That’s because people there are especially worried about how they’ll manage to pay off their mortgages, which are set up differently than they are in the US.

“Unlike the US, which has a fixed rate option, UK mortgages reset after the first five years. Much of it is expected to restart in 2023,” said Aptos Retail VP of Strategy Nikki Baird, who is on top of global retail trends and believes the slowdown in consumer spending reflects growing concern. for balancing bills with vacations and discretionary spending.

UK foot traffic also reflects the sluggish economic climate. The most recent data from Springboard says footfall dropped 7.5 percent last week, with main streets seeing a 10.1 percent drop.

“The gap from the 2019 footfall level widened last week from the previous week, indicating that the footfall drop in the week after this year’s midterm was more severe than in the same week. week before Covid,” said Diane Wehrle. , chief information officer of the data firm.

The slowdown has been a factor in job cuts at Asos, bakerThe sale of Reebok to Authentic Brands Group, owner of Reebok, and a bankruptcy here and there.

Earlier this year, the British menswear brand TM Lewin collapsed for the second time thanks to a less formal back-to-work climate causing male employees to go informal in their cubicle. And home furnishings lifestyle platform Made.com has a trio of administrators handling its affairs after it ran out of cash.

“We are deeply saddened to announce the closure of MADE.COM,” read a statement on its website. “We thank you for being part of our history and we hope to meet again.”

Next Plc edged out Frasers Group with a 3.4 million pound ($3.9 million) bid for Made’s intellectual property, a sharp drop from the company’s 775 million pound ($882 million) valuation. online furniture store last year after it went public. Bloomberg reported that more than 300 Made.com workers will lose their jobs.

this week both joules Y Marks and Spencer (M&S) gave investors cause for concern with its latest warnings.

joules

Joules is running out of options now that staples like wellies and outerwear haven’t sold as well as he’d hoped. The fashion lifestyle and homewares chain is trying to secure a bridging loan to give it some breathing space while it looks at what else it can do to stay afloat.

Joules’ debt reached about 25.7 million pounds ($29.4 million) at the end of October, while he only has 800,000 pounds ($917,400) in working capital. While working capital amounted to £11.4 million ($13.1 million), £5.6 million ($6.4 million) of that amount is tied up by payment providers and £5 million pounds ($5.7 million) will be used to pay off the short-term revolving line of credit due on November 1. 30 who used to order holiday season merchandise/

Joules sounded the alarm in may when he said he was having trouble selling products at full price and delivering the product on time. That same month, Nick Jones resigned as CEO. In July, the retailer called in KPMG’s debt advisory experts to help increase his cash position. August speaks with Next Plc for a 15 million pound ($18.2 million) investment stake it amounted to nothing.

On Monday, Joules said his turnaround plan focused on controlling costs and managing cash is going according to plan. The company has also streamlined its wholesale operations and is almost entirely out of the European Union and the US It has changed its approach to sales, promotion and purchasing and has finished updating its product process and sourcing model.

Despite the positive progress, Joules is still struggling to move the full-price product. Since its August update, sales for the 11 weeks to October 30 were worse than expected and e-commerce isn’t doing well either. Better prices are helping margins, but promotions are hurting.

Joules blamed the UK’s “challenging economic environment” and the fallout on consumer confidence and incomes.

“Furthermore, while dresses, menswear and more formal product categories have performed well, larger core categories such as outerwear, wellies and knitwear have been affected, in part, due to the milder climate than expected,” he added.

Joules is currently in talks with potential strategic investors, including company founder Tom Joule, who recently returned to the company. He is considering making a capital investment and is talking to lenders about a possible bridging loan as a stopgap measure while refinancing plans are explored. Joules might as well go the CVA increased route or equity. And Joules is asking lenders to give up some of their financial loads

MS

Earnings are slipping at M&S, which on Wednesday reported a 23.7 percent drop in the first half for the metric and said it expects a drop for the full year as well.

The retail chain believes that next year will be even worse than the current one. Sales for the first four weeks of the second half remain on schedule, with sales of clothing and home goods up 4.2 percent. M&S expects costs to remain high for the foreseeable future.

“Apparel has been an outstanding performer from a market leading position in value with better style credentials. The program to renew and rotate our store assets is driving sales and rapid returns on investment, while the M&S app now accounts for more than a third of online apparel and home sales,” said CEO of M&S, Stuart Machin. “Looking beyond the current stormy weather, much is within our control and our mandate is clear: pick up the pace, accelerate change, drive a simpler, more efficient business, and invest in growth opportunities to build a reshaped M&S.”

M&S apparel and home goods sales rose 14% in the current year, with store sales up 18.8% and e-commerce up 4.9% on top of strong comparisons. The clothing and home division’s adjusted operating profit of 171.4 million pounds ($195.4 million) reflects strong sales growth and its total price mix. The food division also saw an increase in sales, although operating profit fell.

So what is the problem?

M&S says clothing and home now offer better value for money and style, helping the division increase volume in the period as the company invests in emerging growth categories such as children’s clothing.

The company believes that “conditions will become more challenging” in fiscal 2024, citing the falling cost of living and the “sharpest increase in the cost of doing business for many years.”

“Womenswear increased sales 15 per cent in the period despite 5 per cent fewer options and the overall business had 276 lines achieving sales of more than 1 million pounds ($1.1 million). in the first half. Sales on these lines were up 25 percent “compared to the same period a year ago,” M&S said. Dresses increased by more than 50 percent, while men’s formal shirts also improved.

Leggings, underwear, sleepwear, and school uniforms are not as sensitive to changes in discretionary spending. These account for more than 60 percent of M&S’s clothing and home sales in the last year.

M&S stores in Stevenage now feature redesigned fitting rooms, self-service checkouts for clothing and home goods, click-and-collect and improved RFID to reduce shrinkage and improve stock counting. “The store beat its business case in its first three months of operation. It is attracting a younger shopper profile, over-indexing in children’s clothing, home and beauty, and has high levels of cross-buying,” the company said.

M&S has realigned its supply chain operations to hold more stock and now touch product fewer times, reducing labor costs and markdowns. Returns now processed in 10 days vs. 20 means healthier revenue.

The company adds drop shipping to attract more third-party brands.

For the six months ended October 1, revenue rose 8.5 percent to 5.54 billion pounds ($6.31 billion) from 5.11 billion pounds ($5.82 billion). Pre-tax profit rose 23.7 percent to 205.5 million pounds ($234.3 million) from 269.4 million pounds ($307.1 million).

Leave a Comment