Shares in fast fashion womenswear outfit Quiz (QUIZ:AIM) have collapsed by 52.5% to 15.25p as the omni-channel brand issues yet another profit warning and says it is undertaking a review of the business.
Sales disappointed in the final quarter of the financial year to March amid exacting retail industry conditions.
The latest setback means the shares have now shed 90% of their value since its 2017 stock market debut at 161p, thanks to a series of trading setbacks.
Between 1 January and 28 February 2019, the occasion wear and dressy casual wear specialist struggled amid an uncertain consumer spending backdrop and recorded ‘a significant shortfall in sales’ versus management expectations.
Worryingly, Quiz also had to slash prices to shift unsold stock, highlighting how crowded the fast fashion space has become and possibly raising questions over the longevity of the QUIZ brand.
A SIGNIFICANT SHORTFALL
‘Given the significant shortfall in sales experienced in the final quarter of full year 2019 to date, and should this trend continue throughout March 2019, the group anticipates revenues for full year 2019 to now be approximately £129m’, warns Quiz in its latest share price cratering earnings alert.
That is below the downgraded annual £133m top line guidance issued with January’s Christmas trading update (and profit warning), where Quiz flagged disappointing festive sales and margin pressure due to a higher than expected level of discounting.
READ MORE ABOUT QUIZ HERE
Today, the Glasgow-headquartered retailer says it also expects ‘the increased level of discounting will have a material impact on gross margins generated in the final quarter of full year 2019’.
And furthermore, Quiz now anticipates posting earnings before interest, taxation, depreciation and amortisation (EBITDA) of roughly £4.5m for the year to March, sharply down from January’s guidance for EBITDA ‘in the region of £8.2m’.
POSITIVE TAKEAWAYS?
Bulls might point to a 16.2% surge in online sales during the latest reported period, although this has been offset by an 11.1% slump in sales from UK concessions and standalone stores, meaning sales were down 1.7%.
Quiz also has the balance sheet to ride out near term high street storms, with £8.9m net cash as at 5 March.
Chief executive Tarak Ramzan comments: ‘Whilst the board remains confident in the strength and appeal of the QUIZ brand, as demonstrated by our continued sales growth online, this has been a highly disappointing trading period for the group.’
WHAT DO ANALYSTS THINK?
Panmure Gordon’s Andrew Blain downgrades his 2019 forecasts and places his recommendation under review, questioning whether the situation is salvageable or not.
‘The succession of disappointing updates leaves question marks over the brand and the business model,’ says Blain.
‘Regarding the former we believe that there is still an expanding customer base and the growth of online suggests that the transition between sales channels is the group’s core challenge.
‘Trying to manage this through a period of unprecedented consumer uncertainty and unusual weather patterns, whilst also putting in place the cost base to support ambitious expansion plans, has proven several bridges too far.
‘The company has a 25-plus year trading history and we believe that a profitable business model can be cultivated, however we recognise that an improvement in trading and a complete reassessment of the group’s estate of stores and concessions is required.'
