More bad news for Quiz in H1 but online, international ops improve
It's been a tough few months for Quiz Clothing and on Wednesday, the company reported its half-year results that really illustrated this. In the six months ended September 30, it said "continued challenging market conditions impacted UK stores and concessions”, although "online and international channels grew in the period”.
Diving straight into the figures, the fast-fashion brand said its group revenue fell 5% to £63.3 million and its underlying EBITDA plunged 54% to £2.7 million. It made a pre-tax loss of £6.8 million, compare to a pre-tax profit of £3.8 million a year earlier, and an underlying pre-tax profit of £0.6 million, down 85% from an equivalent profit of £4.2 million a year ago.
So clearly not an encouraging set of figures. But there was some better news in the report. While online revenue only managed to be "consistent" at £20 million, underlying online revenue was up 7%.
Meanwhile international sales rose 3% to reach £12 million. That was a sharp contrast to revenue from UK stores and concessions that fell 11% to £31.3 million.
And the gross margin it generated rose to 61.7% compared to 59.3% in H2 2019.
One point that was encouraging in its results statement was that its own website sales were up 12% with Quiz website traffic increasing by 11% year-on-year, “reflecting effective marketing and improved conversion rates”. And its active online customer base increased 31% period-on-period to 648,000 “with continued positive trends in social media engagement”.
And that international performance was clearly a pleasing one with the company saying that international franchise sales were up 7%. Its Spanish stores also contributed to growth, although this contribution was offset by a decline in sales in Irish stores and concessions where it’s seeing many of the same issues as in the UK. It's present in 20 countries in total and also saw growth in the US and Middle East.
STORES VS ONLINE
The sharp difference between the underlying profit figures and the actual numbers was accounted for by some exceptional costs that shouldn't recur. There was an exceptional charge in relation to “store impairments and onerous leases” that was “partially attributable to the structural shifts whereby consumers are increasingly shopping online.”
Founder and CEO Tarak Ramzan said that while it’s "disappointing to report a decline of profits year-on-year, management are focused on implementing the actions identified further to the group's business review conducted earlier in 2019. We will look for further improvements to develop our omnichannel offering”.
And omnichannel really is important for the company. It's reducing its reliance on physical shops and said that over the next two years, it will have the opportunity to renegotiate or terminate leases in 50% of its UK stores. However, before leases can be renegotiated, “at current and projected sales levels, a number of [its] stores will lose money”.
Along with this strict control of costs relating to its physical shops, the company is investing in its e-commerce operations, which makes sense given the rising sales it's seeing there. In the latest period, it said its online conversion rate rose 22% and active online customers increased by 31% to 648,000. There were also “improvements in other key metrics such as shopping frequencies and basket size in the period”.
It also had a positive response to the introduction of its delivery pass, QVIP, which offers customers unlimited free delivery and collect in-store for a small annual fee. The company explained that “the benefit of the increased customer engagement this encourages is reflected in increased order frequency and Average Transaction Values from those who have subscribed to this service”. And it has seen similar benefits from the use of Klarna’s 'buy now, pay later' payment platform technology.
Meanwhile, on the product front, the company has achieved some success via its first collaboration with reality TV star Samantha Faiers, “which yielded a positive reaction”. And it launched a second collaboration which also proved to be “successful”.
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