By Geoffrey Smith
Investing.com -- Shares in U.K. fashion group Joules tumbled at the open on Monday after the company confirmed that it has hired advisors to help with its growing debt problems
Joules (LON:JOUL) stock fell some 25% at the opening before paring losses a little to trade down 23% by 03:50 AM ET (0750 GMT).
It said it has appointed KPMG to advise on the process of "improving profitability, cash generation, and liquidity headroom," but rebuffed suggestions that it is running out of cash due to weakening demand and high inflation.
The company said its net debt currently stands at 21.4 million pounds ($25.3 million), giving it some 11.3 million pounds of headroom within its current credit agreements. That's little unchanged from its previous update in May, when it warned that wholesale sales in the U.S. and U.K. were well below expectations, with sales increasingly dependent on promotions. In the U.K., the home and garden department in particular was trading particularly poorly.
"Whilst the Group continues to manage its cash resources carefully over its seasonal borrowing peak, it expects to have sufficient liquidity to manage its working capital requirements over this time," Joules said in a statement. In a longer-term perspective, it said, it is making "good progress" on the measures it announced in May which aim at simplifying the business and cutting costs to restore its profitability. These include big changes to its wholesale operations to focus on fewer, profitable wholesale accounts and reducing its dependence on supply chains originating in China.
Joules is one of many retailers currently being forced to discount heavily after experiencing a sudden and sharp drop in demand as the cost of living crisis hit consumer disposable incomes hard.