Joules Ltd rises 9% on trading update

Joules Ltd (LON:JOUL) (JOUL.L) has released an update which has sent its share price higher

Joules Ltd
Joules Ltd

Premium British lifestyle brand Joules Ltd (LON:JOUL) (JOUL.L) has released a trading update for the first half of the year today. It has been well-received by investors, with the company’s share price moving around 9% higher.

Revenue for the period increased by 17.6%, with the flexibility of the company’s business model, the appeal of its products and the strength of its brand being contributing factors according to today’s update. It has also recorded strong international growth, with international sales now representing 16% of total sales. This is up from 11.3% in the same period of the previous year.

The company’s performance has been impressive in my view. As with many UK-focused retailers, Joules has faced challenging trading conditions in recent months. It expects that the operating environment will remain tough in the near term.

It has put in place contingency plans in case of a ‘hard Brexit’, which include establishing an EU-based third-party distribution facility, as well as preparation for increased administrative activities and hedging US dollar requirements more than 12 months forward.

In my view, Joules has relatively upbeat growth forecasts. It is expected to record double-digit EPS growth in the next two financial years, while its shares have a PEG ratio of around 1.4. This suggests to me that they could offer a margin of safety ahead of what may prove to be an uncertain period for the wider retail sector.

Consumer confidence may remain weak in the near term in my view. This could cause investor sentiment to decline towards the wider retail sector to some degree. As a result, I think the stock could experience a volatile period due mostly to external factors.

In the long run, it seems to offer a low valuation, strong brand and improving international growth potential. Therefore, I’m cautiously optimistic about its prospects in future years, but its relatively small size and uncertain outlook mean that volatility could be high in future months.

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Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page