A profit warning from fast-fashion retailer Quiz (QUIZ) – which only listed last year – sent the shares plummeting 35 per cent last Friday. But anybody who thought the market’s shock might ease over the weekend was sorely mistaken when the stock took another 30 per cent dive at market open on Monday. Management has blamed a combination of factors, but most notably lower sales to third parties such as Next (NXT) and Debenhams (DEB). It has cut its first-half cash profit expectations by £1.5m to "not less" than £5.5m. And if this third-party sales trend persists, cash profits for the year to March 2019 could land around £11.5m, against broker Peel Hunt’s previous £16m forecast.
The sudden turn in events has surprised investors and City analysts alike. Reporting results to the end of March, Quiz bosses revealed a solid 30 per cent rise in sales, which arguably paled in comparison to the 158 per cent leap in online revenues. It followed an 87 per cent rise in the number of active, online customers and helped push underlying cash profit up by close to a quarter, prompting a maiden dividend of 0.8p.
But nerves started to set in when House of Fraser – one of Quiz’s concessionary retail partners – entered administration over the summer. Quiz took an immediate £0.4m provision against lost sales, which looked manageable considering strong top-line growth elsewhere. But news of poorer wholesale revenues combined with difficulty on the high street has thrown up questions about Quiz’s ‘omnichannel’ model and whether it’s quite as defensive as theory would has us believe. After all, it wasn’t the only retailer with wholesale, online and licensing operations to disappoint the market this week. Half-year numbers from Ted Baker (TED) also failed to inspire the share price, made worse by chief executive Ray Kelvin saying he expects a “challenging” second half. Footfall across the British high street continues to suffer, while mild weather has led to subdued demand for autumn/winter ranges for several retailers. This has been particularly true for Quiz, as like-for-like sales across stores fell during September.
