Shares in Quiz (QUIZ:AIM) edged 2.1% higher to 7.35p on Tuesday after the embattled womenswear brand said it has ‘taken multiple actions’ to preserve the liquidity required to see it through the Covid-19 crisis. Yet the struggling fast-fashion brand still faces an uphill struggle to turn its fortunes around.
Quiz has failed to keep pace with the accelerated structural shift towards online retail caused by the pandemic, which has also curtailed social events and hammered demand for the retailer’s trademark occasion and dressy wear.
Furthermore, Quiz warned the recent tightening of Government restrictions on social activities ‘has again impacted demand for QUIZ clothes and there remains limited visibility as to when these restrictions will be relaxed’.
DIRE DELAYED RESULTS
Delayed results for the year to 31 March 2020 demonstrate the size of the challenge facing Quiz. The retailer lurched from a £600,000 pre-tax profit to an underlying loss before tax of £3.7 million as group revenues fell 10% to £118 million, the top line impacted by the sharp decline in March sales caused by lockdown.
Worryingly, sales in the six months to 30 September 2020 tumbled 73% to £17.2 million, with Quiz hurt by the stores and concessions closure in the spring.
Since the pandemic hit, Quiz has restructured its store portfolio and reopened 60 stores in the UK and four in the Republic of Ireland. It remains in negotiation on a further five stores.
Quiz also announced that it had conducted a thorough review of its ethical auditing processes following revelations of poor conditions for factory workers in the UK. ‘As a result of the review, the group has taken a number of actions to strengthen its procedures and ensure that its products are consistently supplied in line with QUIZ’s Ethical Code of Practice,’ insisted the company.
Today’s outlook statement from Quiz highlights that despite the challenging trading conditions, it is sitting on £4.8 million of net cash with a further £3.5 million of liquidity from an undrawn banking facility.
Thanks to its store restructuring, the average lease term on its stores is now just two years, which together with more favourable rental terms, gives Quiz a platform to regrow sales.
‘Looking ahead, we remain confident in the strength of our brand and believe that underlying customer demand remains strong for the brand’s trademark occasion wear which we aim to capitalise on when restrictions on social events are eased,’ insisted founder and chief executive Tarak Ramzan.
He is confident ‘that the actions we have taken to preserve liquidity and reduce our cost base while continuing to invest in the brand mean that the group can return to profitable growth as market conditions improve.’
HARD YARDS AHEAD
However, Shore Capital questions whether the company’s concession model with Debenhams and House of Fraser ‘is a viable operating platform given lower city centre footfall’.
And the broker warns: ‘The product mix of occasion wear is challenging given current Covid restrictions across much of the UK. Whilst the online business is now 33% of group sales this should, in our view, be powering ahead as we have seen with other clothing brands.
‘Other brands have successful pivoted towards loungewear and made their sales mix less reliant on going out clothes. The net cash position and liquidity gives the company room for now but we are of the view that whilst management have put in cash preservation measures there are still hard yards ahead.’