Quiz profit warning as store sales prove tough
today Mar 7, 2019
A raft of trading updates from UK fashion retailers in the past few months haven’t shown a sector in robust good health so it wasn’t exactly surprising on Thursday to see Quiz Clothing turning in a weak update for the first two months of the year.
But while it wasn’t a shock, it was a disappointment as the brand had previously looked to be one of the UK names that was outperforming the sector as a whole. And while it continued to do so online, its stores performance was a bad one and dragged its overall New Year revenues into negative territory.
Let’s look at its latest figures. The company said that January and February (two-thirds of its fiscal fourth quarter) were hit by "the uncertain consumer spending backdrop [that] has remained challenging.” The result? “The group has recorded a significant shortfall in sales compared to the board's prior expectations. Furthermore, there has been a requirement to apply higher than anticipated discounts to clear excess stock,” it said.
As mentioned, it continued to increase sales online during the period, with a 16.2% rise. But this was offset by a chunky fall of 11.1% in revenue from its UK standalone stores and concessions. That meant overall revenue fell 1.7% year-on-year in the two-month period.
Its Christmas trading update on January 11 had provided guidance for revenue and profits for FY 2019 that the company said “at that time, reflected the most recent sales trends through our online, UK stores and concessions sales channels in addition to the impact of additional available retail space compared to the previous year.”
But that guidance (revenues for FY2019 to rise 9.2% to around £133 million and Ebitda of £8.2 million) has now been scaled back. If the current trend continues through this month, the company expects annual revenues of £129 million and profits way down from the earlier guidance at just £4.5 million.
At least “the Quiz balance sheet remains strong with net cash of £8.9 million” as of March 5 and “inventory continues to be carefully managed with current stock levels similar to the previous year.”
And it’s hardly surprising with all of the above taken into account that Quiz has become the latest UK retailer to launch “a thorough review of all aspects of the business with a view to mitigating the effects of changed trading conditions.”
CEO Tarak Ramzan said that while the board “remains confident in the strength and appeal of the brand, this has been a highly disappointing trading period for the group.”
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