Quiz swings to £7m loss as it blames ‘very challenging’ UK high street
Fast fashion brand Quiz has plunged into a loss due to expensive shop leases and a lack of footfall in the first half of its financial year, it revealed today.
Shares sank 16 per cent in response to leave the embattled retailer’s stock valued at just 14.05p per share.
Read more: Quiz has already issued two profit warnings this year
The figures
Quiz swung to a loss before tax of £6.8m in the six months to the end of September, after posting a £3.8m profit this time last year.
Underlying profit sank 85 per cent year on year to just £600,000.
It was also hit by a drop in sales that knocked revenue five per cent lower to £63.3m.
Shareholders suffered a 4.44p loss per share, compared to 2.46p in earnings per share a year ago.
Net cash at the end of the period amounted to £7.2m, down from £12.5m a year ago as it spent £900,000 on new stores and £1.4m on IT investment and distribution capacity.
Why it’s interesting
Quiz blamed what it called “very challenging” conditions on UK high streets for the huge drop. It warned more people are increasingly shopping online but its own online revenue was flat year on year at £20m.
Quiz, which has 73 stores and 171 concessions in the UK, also booked a £7m charge for onerous leases in its store estate.
The retailer said it has negotiated lower rents at stores whose leases have expired this year, and it will close any that threaten profitability.
Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, warned Quiz may end up closing half its store estate.
“This is predominantly an online business, yet the group’s underlying stores and concession seem to be providing the biggest drag on profits,” she said. “So why not ditch them?
“It looks like up to half may close, as it attempts to renegotiate or terminate leases over the next two years. In the meantime they will just be an additional cost that the group could do without.”
“The all-important Christmas trading period is underway and investors and management alike will be hoping Quiz has what it takes to stand out in the fiercely competitive fast-fashion retail marketplace it’s currently looking a little bit lost in.”
John Moore, senior investment manager at Brewin Dolphin, called the results a “nightmare before Christmas” for Quiz.
“The City has been worried about Quiz for some time now and today’s figures will do little to ease those concerns,” he added.
“The implementation of its root and branch review will be absolutely critical to Quiz’s future prospects – there is a significant amount of work to be done to make the brand distinct, self-sufficient and capable of handling the wider challenges in retail.”
Julie Palmer, a partner at Begbies Traynor, warned that Quiz may find landlords resistant to rent cuts to avoid a swathe of retailers demanding renegotiations.
“Empty shops on the high street are bad, but for landlords, chains tied into loss making contracts would be unsustainable,” she said. “If those negotiations happen the knock on effects will be more important than the immediate discussions.”
Read more: Shoppers plan to spend more on the high street this Christmas
What Quiz said
Tarak Ramzan, chief executive officer, said:
“Whilst it is disappointing to report a decline of profits year-on-year, management are focused on implementing the actions identified further to the group’s business review conducted earlier in 2019. We are pleased to report progress improving gross margins and reducing costs across the business, and will look for further improvements to develop our omni-channel offering.
Quiz has continued to achieve sales growth in its international business and, in particular, online despite the challenging trading conditions. This has been supported by effective marketing investment including a successful collaboration with TV star Samantha Faiers.
The group has continued to generate cash and had £7.2m of cash at the period end. The board remains firmly focused on further improving the group’s financial performance and growing revenues with a strong focus on Quiz’s online and international channels.
More to follow.
Main image credit: Quiz