Embattled fast-fashion brand (QUIZ:AIM) rallied 9.4% to 8.15p on Wednesday as investors peered past a disastrous 77% sales slump. That was the outcome for the five months to August as stores were closed through lockdown and competition intensified.
There was no detail on profitability.
Quiz also conceded sales from UK standalone stores and concessions remain below last year’s levels. However, the hard-pressed retailer is ‘encouraged by the consistent improvement in like-for-like sales in recent weeks’, flagged an improvement in online sales and also reported positive progress with renegotiating the leases for its standalone Quiz stores.
PANDEMIC-DRIVEN PUNISHMENT
First the bad news. Total sales tumbled 77% to £12.8 million in the five months to August 2020 as the pandemic forced Quiz to shutter stores and concessions from late March.
In another blow to the business, Quiz’s online operations were suspended for a fortnight in April in order to protect workers at its distribution centres. This was a factor in a 54% decline in online sales, alongside a plunge in sales through third party websites.
Gross margins were also 6% lower than the previous year as lower demand led to price cuts as clothing retailers fought over the scraps, although Quiz does not expect that this level of discounting will continue for the remainder of the year. Though sales through Quiz’s own websites were down 45% to £4.9 million, the company insisted ‘sales have steadily improved’ through the period.
August revenues were 11% lower than the previous year which reflected the benefit of increasing casual product ranges. This allowed Quiz to tap into the stay-at-home trend as restrictions on socialising sapped demand for occasion wear, such as dresses.
RESTRUCTURING PROGRESS
Quiz, whose shares have been hammered by a string of profit warnings, has restructured its retail store portfolio and made progress with renegotiating lease arrangements with landlords for its standalone Quiz stores.
Before the restructuring, it operated 75 standalone stores in the UK. As of today, 48 have reopened and the retailer expects to reopening around 60 stores in the UK in total.
‘Rental terms for the reopened stores are consistent with those targeted by the group,’ explained Quiz. ‘They provide a flexible cost base going forward with rents payable predominantly based upon revenues generated rather than previous higher fixed rental arrangements. The average lease length on these stores is 24 months.’
Before non-essential shops were shuttered due to Covid-19, Quiz operated 164 UK concessions, but a number haven’t reopened and as of today, that number has dropped to 141 UK concessions.
The international business remains challenged too. Quiz has decided not to reopen any of its Spanish stores, while Debenhams’ decision to close its operations in the Republic of Ireland means the number of Quiz concessions in Ireland has reduced from 23 to 11.
Quiz’s biggest customer in the United States has entered a bankruptcy process and ‘its future remains uncertain’, although Quiz clearly sees potential for the brand across the pond, as it is ‘actively pursuing new opportunities in the U.S market’.
