Retailer Joules admits insolvency proceedings are being considered

Struggling retailer Joules is considering a company voluntary arrangement (CVA) among options to help boost finances and support its turnaround plan.

The fashion brand has already announced that it is looking at an equity raise, having failed to receive an investment from Next after talks with the high street giant broke down last month. 

Insolvent businesses often use CVAs to cut or delay their debt payments to creditors, such as landlords and suppliers, whilst significantly restructuring their operations.

Under a fortnight ago, Sky News reported that Joules was examining such a scheme, which could result in job losses, shop closures and rent reductions.

Should the company decide to undertake a CVA, it would require support from 75 per cent of all its creditors or face possible voluntary liquidation.

Famed for its countryside-inspired look and ‘yummy-mummy’ demographic, Joules has seen grappled with poor sales in recent years, not least due to Covid-19 restrictions severely dampening demand for clothing in the UK.

Trade initially recovered after shops reopened and orders of homeware and garden furniture products grew, but the group had to contend with supply chain pressures and increasing costs.

Its fortunes have worsened in 2022 as the cost-of-living crisis has squeezed Britons’ spending patterns, while a summer heatwave depressed demand for core products, like rainwear and wellington boots.

The Leicestershire-based firm has issued numerous profit warnings and seen margins hit by consumer preferences for discounted products.

Under a turnaround plan, it has sought to enhance its pricing and promotional strategy and put greater attention on products with greater profitability and a shorter time to market.

Joules said ‘good progress’ was being made on the strategy, as well as on its ‘simplification agenda and cost management process’.

It added: ‘The group continues to assess its ongoing financing requirements, including a possible equity raise, to allow the company to strengthen its balance sheet and provide a strong platform to support the turnaround plan.

‘Whilst this remains the Board’s focus, the company also continues to consider a range of other potential options which may be available to it, where a CVA is one of a number of such alternatives, and notes it has not determined if such alternatives are required.’

Next had been in discussions with Joules over the summer regarding a potential £15million cash injection that would have resulted in the FTSE 100 firm taking a 25 per cent stake.

But not long afterwards, a profit warning sent shares in Joules diving, meaning the Next investment would have been worth more than half the whole business and talks subsequently collapsed.

Even with a 2.2 per cent rise by early afternoon on Monday, Joules Group shares have slumped by over 95 per cent in the past 12 months.