Julian and Rhona Blades, owners of premium mini-chain Jules B, have invested more than £875,000 into the business to compensate for accounting errors stretching back four years.
In a trading update at Companies House, the Drapers Award-winning retailer revealed a £916,000 overstatement in its financial performance, due to mistakes by a former in-house accountant.
The deficit was made up of more than £714,000 worth of overvalued stock, about £479,000 of understated trade creditors and an overstatement of £74,000 for provisions for sales credit notes.
The prior-year adjustment, paired with a £546,000 loss relating to 2014, resulted in a total loss of £1.46m for the year to January 31, 2014.
This led to taxes being incorrectly calculated in the year to January 31, 2013, which resulted in the profit overstatement. The prior-year adjustment, paired with a £546,000 loss during the year to January 31, 2014, led to a total loss of £1.46m.
The update said the directors “had been under the misapprehension that the business was and had been performing profitably”.
Several miscalculations came to light following an internal investigation that ended in 2014. At the time, the unnamed accountant was fired and David Murgatroyd, former head of IT at clothing supplier Visage, was brought in to implement revised buying practices and tighter stock management at the Newcastle-based business.
Blades told Drapers that alongside investing his and his wife’s own money, Jules B was able to negotiate extended payment terms with its suppliers.
“We had an accountant who, for a considerable number of years, was not doing his job. He lost control of the financial affairs and ended up digging a hole. Luckily we had the funds to keep everything going and both the banks and brands have been supportive. It’s been an interesting exercise in an exceptional situation but what doesn’t kill you makes you stronger.”
He said he expects Jules B, which has been operating for 32 years and employs close to 100 staff across eight shops in the north of England – in Jesmond in Newcastle, Yarm in North Yorkshire and Kendal in Cumbria – to be back in profit by December 2015.
In December 2014, six months after the financial issue was discovered, the business hired Robert Young, general manager of premium mini-chain Cruise, as area manager tasked with improving the performance of all its stores.
Jules B is now focusing on developing its online presence via social media and marketing, as well as making improvements to its web store, which accounts for 60% of sales.
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