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Warning lights of recession flash red as Joules follows into administration | accountingweb

Recession warning lights flash as big brands fail


As the UK prepares for the longest recession since records began, Joules follows into administration, signalling further trouble for high-street firms and online retailers.

16th Nov 2022
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Outfitter Joules is the second major insolvency in a matter of days after online retailer collapsed last week, as experts warn the incoming recession may break multiple unwanted records.

The parent firm of the fashion retailer is to appoint administrators after failing to secure new cash funding, putting 1,600 jobs at risk. Joules Group, which also owns The Garden Trading Company, held last-ditch talks with investors after admitting it may not be able to repay a £5m loan by the end of November.

The business, founded by Tom Joule in 1989, requested that shares in the company be suspended as it barrels towards administration. Joules, which has around 130 UK shops, sells clothing and homeware products with a countryside styling, and is most famous for its upmarket wellies. It was valued at around £140m when listed in 2016. 

The firm said the “challenging UK economic environment… has negatively impacted consumer confidence and disposable income”, adding that sales of its popular wellies and outerwear had been hit by milder-than-expected weather.

Longest recession

The Bank of England has said the UK is heading for its “longest recession since records began”, while Chancellor of the Exchequer Jeremy Hunt has predicted further pain for the economy as he prepares to deliver the Autumn Statement. 

“The retail sector is particularly vulnerable to inflation and the rising cost of borrowing, and we expect to see more retail insolvencies over the next 12 months, with further high-profile casualties,” said Nicola Banham, insolvency director at Azets.

“Many retailers – particularly those in homeware – benefitted from consecutive lockdowns during the pandemic, with online sales booming,” Banham told AccountingWEB. “Two years on, amid the ongoing global economic crisis, reality is biting hard for many retailers.”

This is compounded by consumers cutting back on discretionary spending, further increasing financial pressures, Banham said. 

Lockdown heroes to zeroes

Despite the clear economic dangers, experts believe Joules’s failure to evolve post-lockdown may have played more of a factor than the UK’s uncertain trading environment.

“Like Cath Kidston and Laura Ashley, perhaps it ran out of fresh ideas or the curiosity to keep innovating,” said Bumble and Bloom Media marketing consultant Chloe Hall. “How many pairs of posh wellies or patterned cagoules do people need after all?” 

Administration for Joules followed the collapse of another pandemic lockdown favourite,, which was partially rescued by Next.

Thousands of customers may lose out on refunds or stock as the furniture chain stopped taking new orders three weeks ago and filed a notice to appoint administrators shortly after.

High-street stalwart Next purchased’s brand, website and intellectual property for a reported £3.4m, but said it will not be buying the remaining stock.

Lockdown darlings boomed as a “lockdown darling”, going public in 2021 with a £775m valuation, but soon suffered the same fate as many other digital brands when Covid-19 social distancing restrictions eased. 

Fast fashion retailer Asos enjoyed soaring profits up 253% in the six months to February 2021 but has since reported a pre-tax loss of almost £32m this year. Similarly, Missguided, which also sold clothes to younger demographics, collapsed in August weighed down by more than £80m in debts.

E-commerce sales of DIY, furniture, home delivery takeaway and grocery services and many other online verticals enjoyed a boom period during the Covid-19 lockdowns, prompting many companies to expand aggressively in anticipation of ongoing high demand.

“There was a lot of money sloshing around during the pandemic. It looked like the future was going to be entirely online,” said Adrian Palmer, professor of marketing at Henley Business School.

With the UK entering a recession again, inflation worries, Covid recovery loan defaults, and worsening trading conditions, more high-profile retail casualties are likely in the coming months, experts told AccountingWEB.

Insolvencies trend upward

Costs are rising across the board, and brands will be hit as suppliers raise their prices, along with rising energy and tax costs and weaker consumer demand, said Rick Smith managing director of insolvency specialists Forbes Burton.

"We’re likely to see quite a few more profit and trade warnings from businesses as the winter period continues and well into next year,” Smith said. “The government may put in some extra support for businesses, but I wouldn’t count on it at this point.”

Figures released on Tuesday revealed the number of registered company insolvencies in October 2022 was 1,948, up 38% on the previous year, and 32% higher than the number registered three years previously. Pre-pandemic figures were 1,477 in October 2019.

Compulsory liquidations

There were 242 compulsory liquidations in October 2022, more than four times as many as in October 2021. 

Numbers of compulsory liquidations have also increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC, the government said.

October 2022 was the first time that the number of compulsory liquidations was similar to the pre-pandemic figures, partly caused by a large number of petitions (45) from a single bank.

Nick O’Reilly, director of restructuring and recovery at MHA believes rising interest rates have caused businesses to revise annual forecasts and “could prompt many to throw in the towel”.

“The retail sector has been hit particularly hard, as demonstrated by the recent collapse of and the reported financial troubles at fashion chain Joules,” O’Reilly said. “Bounceback loan defaults also continue to grow, highlighting the ongoing difficulty for retailers and other businesses to return to an even keel following Covid-19 and ahead of an impending recession.”

Prepare for unpredictable economics

Business owners will look to the Chancellor’s fiscal statement on Thursday “as a critical moment to provide new support” to help them come through the economic storm, he said.

CFOs and directors should already be concerned at the state of play when it comes to cashflow and the general health of the economy, said Smith. “But, if we are to see this period of unpredictable economics and particularly political unrest, then several things should be considered,” he told AccountingWEB. “Firstly, liquidity is a real issue and should be monitored closely.”’s collapse was due to not being liquid or in good enough financial health, and when fulfilment and supply chain issues are affecting day-to-day trade, firms must prioritise agility, Smith said.

"Simple steps can be made almost immediately,” he said. For example, cashflow forecasts can really make a difference in knowing where a business can move to grow. “And, it can also identify pinch points where it may feel more squeezed, be that seasonally or through strategic decisions you are planning on taking,” he said.


Replies (11)

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By Jason Croke
16th Nov 2022 13:45

Nice article.

Next was considering acquiring Joules but must have got spooked when Joules share price dropped/profit warning.

Made.Com was famous for not delivering on orders, customers waiting several months for products to be "made". that may have been partly down to increased purchases during lockdown and difficulty in obtaining raw materials (and labour) post-lockdown, but looking at Google and Trust Pilot reviews, Made simply couldn't deliver the quality the prices were demanding, paying top end and waiting months for mediocre products doesn't inspire the consumer much.

Joules suffered a similar fate in terms of supply chain problems and rising costs on the back of a lockdown boost.

As pockets are squeezed further with inflation and rising gas/electric costs, non-essential consumer goods such as fancy wellies and velvet sofas may have to take a back seat as people try to keep the home warm and occupants fed.

If the government do not get a firm grip on the economy, inflation and outlier factors such as the broken system for how wholesale electricity is sold on the markets, restoring faith in the high street (hospitality and retail), then we are likely to see many more businesses fail, both well-known names as well as the countless SME's out there.

Thanks (2)
Replying to Jason Croke:
By C Graham
17th Nov 2022 10:30

agree that some of these brands were heading towards failure anyway. Made probably spent too much on advertising and branding but failed to deliver on product. Joules never seems to quite fit a market - neither cheap nor expensive it fell into the gap of being undecided about its target audience was. I quite like some of their stuff but they then failed to spend enough on branding and marketing so were a bit out of reach and lacked focus. Supply chains hit all retailers but sometimes you have to look at the brand and ask if it failed for other reasons. And often the market is simply already flooded. People can only buy so much furniture and clothes.

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Replying to Jason Croke:
By spilly
17th Nov 2022 21:37

It’s never a good advert for a business when you have to send back 3 sofas before finally getting one with all 4 legs the same length.

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By Catherine Newman
16th Nov 2022 15:29

I would never have seen that coming. I have several Joules tops and they are such good quality and long lasting. Wherever we went on holiday we always visited the usual shops-Joules, Fat Face, Crew Clothing. This will affect 130 landlords and God knows how many staff. It has made me realise I haven't received any mailshots for a very long time.

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By Hugo Fair
16th Nov 2022 16:04

Cash (or at least liquid assets) is King ... always was and always will be.

Nothing wrong in borrowing if you know how to reduce it on demand, just like there's nothing wrong in getting external investment so long as it doesn't dilute your control.

Basically - staying in control (and knowing where pitfalls lie) are scarce skills nowadays.

Thanks (3)
Replying to Hugo Fair:
paddle steamer
16th Nov 2022 16:40

Agreed, borrowing is a curse in any downturn, banks who lent you that cash umbrella demand it back when it starts raining, they devalue their estimation of the worth of all your business (not just the bit that say lost a tenant, is in slight trouble) and doubt your covenants, it is a very uncomfortable place to be, in effect you can start spiraling into their clutches until your business cannot continue .

I had a fatal one in 1994 when employed in retail with Benetton shops, my employer folded in that downturn . Nationwide nearly killed us from 2010 onward using valuations they instructed to push us to sell residential properties, in hindsight we have lost a minimum of £4m selling the 60 flats due to, what was , short sightedness forcing sales into a poor market.

Still, behaving like a vulture, a downturn may bring opportunities.

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Replying to DJKL:
By Hugo Fair
16th Nov 2022 17:28

Vultures get a bad press ... assuming you're not personally related to what is now carrion, it should be easy to see vultures as ecologically sound (nature's efficient recyclers).
With an aggressive PR team behind them I can see their slogan - "From death we bring life!" (although that's possibly treading on the toes of several religious groups). :=)

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Replying to Hugo Fair:
paddle steamer
17th Nov 2022 20:02

There is of course the counter re high borrowing when inflation is on the rampage, the survivors can emerge to see their debt slashed in real terms. (Of course also need long term asset price increases)

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Replying to DJKL:
By Hugo Fair
17th Nov 2022 20:59

Which is what happened to (one can hardly say was planned by) those who pushed the envelope with their mortgage throughout the '80s ... and are now castigated by the young as having 'lucked in'!

[I'm still waiting - and have been for 20 years - for the 'inevitable' crash in house prices].

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By AndrewV12
17th Nov 2022 11:21

Relax fashion Company's on the high street come and go like early spring snow. I always feel sorry for the workers.

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17th Nov 2022 12:49

Interest on our company debt has doubled, maybe it will treble before things ease.

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