Joules' talks with Next hit hurdle
Struggling retailer Joules' £15 million lifeline investment from Next is now in doubt. Hopes of securing backing from the high street retail giant have hit a stumbling block after Joules issued a fresh profit warning, according to Sky News.
In its 19 August trading update, Joules admitted that recent trading has “softened materially” and H1 profits would be hit.
The two companies have since failed to agree the terms of an investment after confirming they were in discussions at the start of August. City sources said this weekend that Next had not received sufficient financial information to enable it to make a formal proposal to the Joules board.
There were also doubts that Next would be prepared to proceed with a deal for at least 33p-a-share, which was Joules' valuation when the talks began earlier this month. Since then, the shares have continued to slide, closing on Friday at just 25.5p.
On Sunday, a Joules spokesperson said it "continues its positive discussions with Next plc about both adopting its Total Platform services to support its long-term growth plans and a potential equity investment. There can be no certainty that these discussions will lead to any agreement, and further announcements in this regard will be made if and when appropriate."
One insider told Sky a deal was still possible, but that time was running out. Next has said nothing so far.
Joules had been looking for an equity investment of about £15m, but its current market value is just under £30m following the plunge in its share price. It had said the deal would take place "at no less than Joules' current market price".
An insider said it was unlikely Next chief executive Simon Wolfson would pay such a premium for a stake.
Joules has 130 stores and employs more than 1,000 people, but has endured a difficult time for several years, both due to external issues and problems of its own making. Last month, it hired KPMG to assist with efforts to improve "profitability, cash generation and liquidity headroom".
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