Profit

Joules bailout talks with Next stumble after latest earnings scare | Economic news

Struggling fashion chain Joules’ hopes of a lifeline from high street giant Next have met a stumbling block days after issuing a new profit warning.

Sky News has learned that the two companies are no closer to agreeing the terms of an investment from Next more than three weeks after confirming they were in talks.

City sources said over the weekend that Next had not received enough financial information to allow it to make a formal proposal to Joules’ board.

There were also doubts that the clothing retail giant would be ready to strike a deal at 33 pence a share or more – Joules’ assessment when the talks were revealed by Sky News at the start of the month.

Since then, the company’s shares have continued to fall, closing Friday at just 25.5 pence.

In a statement on Sunday, a Joules spokesperson said: “Joules continues to have positive discussions with Next plc about adopting its Total Platform services to support its long-term growth plans and potential equity investment.

“There is no certainty that these discussions will result in an agreement, and further announcements in this regard will be made as and when appropriate.”

An insider said a deal was still possible, but time was running out to agree a deal.

Joules said earlier in August he was aiming to secure an equity investment of around £15m, although the company now has a market value of just under £30m following a a catastrophic drop in its share price.

He also said the deal would take place “at least at Joules’ current market price.”

An insider suggested there was “no way” Next chief executive Lord Wolfson would agree to pay a premium for a stake in Joules.

Nine days ago, he told the stock exchange that trading in the five weeks since the end of his financial year had “slowed considerably” and that he would result in a bigger loss than previous market expectations. .

He also announced the appointment of Jonathon Brown, a former John Lewis and Kingfisher executive, as the new CEO.

If a deal is successfully struck, it would make Joules the last big beneficiary of Next’s financial and operational muscle.

Next has entered into joint ventures with brands such as Reiss and Victoria’s Secret in recent years, while recently striking a deal to take outright ownership of baby products retailer JoJo Maman Bebe alongside hedge fund Davidson Kempner.

Joules, which operates in around 130 stores and employs more than 1,000 people, weathered a tough time as inflationary pressures hit the retail sector.

Last month, he hired KPMG to help him improve “profitability, cash generation and liquidity margin.”

He then said he had agreed an extension of banking facilities with his main lender, Barclays, which would place restrictions on his ability to pay dividends.

EY advises Next in its discussions with Joules.

Joules has been listed on the London Stock Exchange since 2016, having been founded in 1989 when Tom Joule started selling clothes from a country show stall in Leicestershire.

Mr. Joule is now a non-executive director of the company.

Joules expects to announce its annual results in October.

A deal with Next would require Joules shareholder approval.

Next declined to comment.