Shares in bombed-out Quiz (QUIZ:AIM) slumped 10.25% to 16.85p on Wednesday, investors heading for the exits on news of worse than expected Christmas sales from the embattled fast fashion brand.
Admittedly, the loss-making retailer managed to avoid yet another profit warning, but this was largely because expectations had already been lowered significantly and also reflected cost-cutting and a more disciplined approach to promotions this Christmas.
FESTIVE SALES DISAPPOINT
While the occasion wear and dressy casual wear specialist delivered a pleasing performance across the key Black Friday week, sales have disappointed since, dragging revenue down 9.3% for the broader seven weeks to 4 January 2020.
Besides hot competition in a crowded fast fashion space that includes Christmas winner Boohoo (BOO:AIM), Quiz’s UK stores and concessions in House of Fraser and Debenhams have been impacted by reduced high street footfall.
These headwinds persisted during the broader Christmas period, driving revenue from brick and mortar stores and concessions down 7%. ‘Surprisingly, there is no mention of how the international stores fared over the period,’ noted Shore Capital this morning.
TALE OF TWO HALVES
Overall online sales slumped by a worse-than-expected 14.8% in a period that proved a tale of two halves for Quiz’s e-commerce business.
Weaker sales through third party sites - Quiz continues to terminate unprofitable revenue streams through the likes of Zalando - masked encouraging 5.9% growth through Quiz’s own websites, supported by improved full price sales as Quiz sought to wean itself off margin-crimping promotions this Christmas.
READ MORE ABOUT QUIZ HERE
Given the £10.7m of net cash on the balance sheet, Quiz chief executive Tarak Ramzan remains ‘confident that we can improve our financial performance and grow revenues. We have a clear customer focus and a flexible model that the board continues to believe will enable Quiz to adapt to the changing retail environment and return to profitable growth in the medium-term.’
THE EXPERTS’ TAKE
However Shore Capital described today’s festive missive overall as ‘another disappointing trading update’ from Quiz. The broker highlighted that while performance in the year-to-date remains broadly in line with management expectations, ‘with three months until their year end the risk could be on the downside still with falling revenues and too much retail footage and an online business in reverse gear.’
Russ Mould, investment director at AJ Bell, commented: ‘Quiz by name, quiz by nature. Everyone now asks the same question: why is trading consistently poor? The company has issued yet another update showing declining sales albeit managing not to suffer a profit warning because expectations were already so low.
‘The retailer reported sales growth from its own websites but revenue from third party website partners remains weak. That suggests its clothes are not standing out from the crowd and its problems may simply lie in its creative department.
‘Its proposition is to sell clothes for people’s memorable occasions. For investors who have suffered a huge fall in the share price - down 90% since joining the stock market in July 2017 - the only memorable thing about the business is its inability to generate value for shareholders.’
