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Joules Administration Threatens 1,600 Jobs

The worsening U.K. retail environment is taking its toll on both consumers and retailers, with Joules Group the latest to collapse into administration.

According to the British Retail Consortium (BRC), total retail sales for October rose 1.6 percent against a 1.3 percent gain in October 2021. Over the three months to October, food sales rose 5.1 percent on a total basis, while non-food sales fell by 1.2 percent on a total basis.

“As the cost of living for consumers continued to rise, retail sales slowed in October. With November Black Friday sales just around the corner, many people look to be delaying spending, particularly on bigger purchases,” Helen Dickinson, OBE and BRC’s CEO, said. “Clothing and footwear, which saw stronger sales this year, declined as the mild weather meant customers held back on buying winter outfits. Meanwhile, electric blankets, air fryers and other energy efficient appliances continued to fly off the shelves as people sought future cost savings.”

Dickinson said the holidays will come later than last year for many, and “may be more gloom than glitter as families focus on making ends meet.” She also noted that retailers face an additional government imposed “800 million pounds ($939.5 million) inflationary increase in their business rates bills next year,” adding that government should freeze rates and reform the “broker transitional relief system” to help alleviate cost pressures.

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KPMG’s U.K. head of retail Paul Martin said that sales across almost every category both online and in store fell year-on-year as consumers adjusted to their shrinking household incomes. And while retailers are betting on a successful World Cup and Black Friday to boost sales, Martin said economic headwinds mean it isn’t likely that the usual festive boost “will be enough” to counteract rising costs, squeezed margins and falling demand. He expects that the toughest holiday season in a decade could see consumers trade down, hunt for bargains, and buy less due to the economic challenges they face.

Retail footfall data firm Springboard said Monday that foot traffic rose by just 1.3 percent across U.K. retail destinations last week from prior week. Footfall was up 5 percent on Wednesday, indicating that the day was likely the most popular for heading to the office for work. Springboard also said that the modest increase indicates “consumer nervousness” against a backdrop of rising interest rates and higher cost of living expenses, noting that a larger spike would be expected under normal trading conditions.

In fact, the deterioration in the economic backdrop and its impact on consumers has some retailer rethinking pricing strategies and other initiatives to help staff. In recent earnings reports, Primark parent Associated British Foods said it would hold prices at current levels at its value apparel chain Primark, while John Lewis in September said it skipped profits to help out staff, customers, communities and suppliers. Initiatives at John Lewis include financial assistance to staff, free food at work for a period of time and one-time cost of living payments, as well as freezing prices and cutting school uniform prices by 95 percent. Marks & Spencer also froze prices on schoolwear throughout the summer and offer “early bird” shoppers a 20 percent discount for purchases before July 25, according to the BRC.

Joules Group

The 5 million pound ($6 million) loan from Barclays Bank to support working capital needs for the holiday selling period turned into Joules’ noose when the retailer couldn’t make the required repayment on Nov. 30.

Joules said on Wednesday that it has named Will Wright, Ryan Grant and Chris Pole of Interpath Advisory as its administrators. It said on Monday that discussions regarding an equity raise, as well as those in connection with bridge financing to help facilitate refinancing plans, have been unsuccessful.

In addition, Wright and Grant will also be named administrators to The Garden Trading Co. Ltd., which is owned by the fashion and home lifestyle retailer. About 1,600 jobs are at risk, as well as 132 shops that are in danger of shutting down.

“The board is taking this action to protect the interest of its creditors,” Joules said on Monday. The company didn’t provide any other details, only that further disclosures “will be made in due course.”

Joules warned last week that it was running out of options, particularly since cold weather accessories such as wellies and outerwear haven’t sold as well as it hoped.

The retailer’s first warning came in May when it disclosed that it was having problems selling goods at full price. That month also saw the exit of former CEO Nick Jones. Two months later, Joules called in KPMG’s debt experts to help it build a cash position.

Joules was in talks with Cornerstone Investment and Next Plc—the parties had discussed a minority-stake investment of 15 million pounds ($18.2 million)—for an equity raise, and it is possible the two could come back to bid for Joules assets. With Joules in bankruptcy, either one could acquire and own the key assets at a far lower purchase price than what it would have paid for just a minority stake.

In addition, company founder Tom Joule returned to the company to lead its product development processes and at one point was in discussions with Joules and its lender regarding bridge financing. He too could enter the bidding fray.

Frasers Group Plc, Gieves & Hawkes

Gieves & Hawkes, the Saville Row tailor servicing the British royal court, could be moving closer to becoming part of the Frasers Group.

Gieves & Hawkes parent Trinity Group was put up for sale by  its liquidators, which had been impacted by the financial struggles of corporate owner Shandong Ruyi Group. That in turn impacted the fate of Trinity’s brands, such as Kent & Curwen and Cerruti 1881.

Trinity purchased the menswear Gieves & Hawkes in 2012 for 32.5 million pounds ($38.7 million) plus earnouts. Bids were due in September. Frasers had put in a bid. Private equity firms and Marks & Spencer were also speculated as having interest in acquiring the brand.

Sky News first reported that Frasers Group Plc is now in talks to acquire the tailor.

Frasers has been particularly active on the mergers and acquisitions front. While it lost out to Next Plc in an acquisition bid for bankrupt, Frasers as increased its investment stakes in Asos and Hugo Boss, and it has bought bankrupt firms Sneakerboy and Missguided. The company also holds a 95 percent stake in close-out platform, a holding percentage that could see Frasers launch a takeover of the Australian firm.