Fashion chain facing challenges
Quiz profits hit amid fears of damage from other retailers
Quiz has taken a hit from House of Fraser’s collapse
Fashion chain Quiz has seen underlying profits for the half year fall 11% to £4.2 million amid concerns that the group could suffer from troubles at other retailers.
The underlying figures exclude the one-off impact in the period of a £400,000 bad debt provision resulting from House of Fraser’s collapse into administration.
As reported in the group’s trading update on 5 October, online sales through third party websites were below expectations for the period and were at a similar level as the prior year.
In a statement, the company’s chief executive Tarak Ramzan said: “We are working with our third-party online partners to address this trend. During the period the group has invested to support the long-term growth plans of the business in areas such as additional headcount in key functions and the expansion of the distribution centre.
“Given the lower than previously anticipated sales, the increase in gross profit was not sufficient to compensate for the higher operating costs incurred. As a result, the underlying profit before tax is lower than the prior year.”
Group revenue increased 19% period on period driven by continued growth across all channels despite challenging external market conditions:
Mr Ramzan added: “Quiz has continued to deliver good revenue growth in the first half of the financial year despite challenging external market conditions.
“The Quiz brand continues to grow, and we have seen good sales momentum in our core collections as well as across extended ranges including QUIZCurve, Occasion and our newest range, QUIZMAN. Towards the end of the period we launched our second collaboration with TOWIE supported by the Group’s first ever national TV advertising campaign.
John Moore, senior investment manager at Brewin Dolphin Scotland, said: “Quiz has seen growth in sales across its different formats – revenue from UK stores and concessions was up 9%, online revenues rose 44%, and international sales increased 16%.
“But the difficult retail trading environment has impacted bottom-line profitability and cash generation – underlying profit before tax was down 11%.
“In addition to what has been reported, there remain concerns that troubles at other retailers could cause problems for Quiz – it has already taken a hit from House of Fraser’s collapse and others could follow.
“Nevertheless, the main concern in the City centres around the company’s ability to generate enough cash to be self-sufficient and to deal with industry blows before it’s in a position to fund future growth potential.”
· Online revenue increased 44% to £20.0m (H1 2018: £13.8m)
· International sales increased 16% to £11.6m (H1 2018: £10.0m)
· Revenue from UK stores and concessions increased 9% to £35.1m (H1 2018: £32.3m)
· EBITDA increased 11% period on period to £5.6m (H1 2018: £5.0m)
· Strong operating cash flows of £6.8m (H1 2018: £5.8m)
· Online sales now represent 30% of Group sales (H1 2018: 25%)
· QUIZ website sales up 70% and QUIZ website traffic increasing by 58% year on year reflecting effective marketing and improved conversion rates
· Active online customer base increased 89% period on period to 495,000 with continued positive trends in social media engagement
· Two further stores and thirteen concessions opened during the period
· Extended collections including QUIZCurve and Occasion continuing to achieve good growth
· QUIZMAN successfully launched in the period
· Second QUIZ X TOWIE collection launched supported by the brand’s first ever national TV advertising campaign
The board propose to pay an interim dividend of 0.4p per share payable on or around 14 March 2019 to shareholders on the register at 15 February 2019.