Quiz sales rise but tough environment send profits crashing
Everybody these days talk about challenging trading conditions when they issue updates or results and Quiz was no different on Tuesday as the occasionwear and dressy daywear specialist reported its preliminary numbers for the year to March 31.
The company managed to generate “growth across all channels” in spite of of the external environment, but profits took a massive hit (more of which later).
Those plunging profits meant the company has been looking carefully at the entire business with the aim of cutting costs and focusing on profitable operations.
Founder and CEO Tarak Ramzan said management now has a “sharpened focused and a clearer vision of what is required to ensure that Quiz succeeds in a dynamic retail sector and achieves its strategic objectives.”
But what exactly is the big problem at the moment? Given that the UK is the company’s largest market, this is the source of most of its issues.
Quiz said “the retail environment in the UK is continuing to experience an unprecedented pace of change with a combination of consumers continuing to spend more online and lower high-street footfall creating structural challenges for retailers. At the same time, the UK consumer has faced - and continues to face - extreme levels of macro-economic and political uncertainty which is impacting on consumer confidence.”
It added that “in the longer term, the rapidly changing retail environment requires the business to be flexible and to maximise sales where profitable growth can be achieved.”
And that means honing its multichannel proposition with the company saying it will “have an even sharper focus on capturing the significant online opportunities available…complemented by the active management of stores.” That suggests it will, like almost every other store-based retailer, be talking to landlords about rents and leases.
And while “the business, brand and strategy remain fundamentally robust, some changes need to be made to the way we operate.”
Short-term measures identified include the termination of some third-party online contracts “which, while contributing to sales growth, negatively impacted the profitability of the business.” And it’s also working towards “a reduction in our exposure to UK department stores; re-aligning the product offering to our core customer demographic; [and] a greater focus on cost control with targeted cost savings having been implemented or identified.”
This is clearly a big reaction to current trading conditions so what exactly happened during the last year to make this necessary?
Well, there was some good news and group revenue was up 12% to £130.8 million. Online revenue was up 34% at £41 million, now accounting for 31.4% of overall revenue compared to 26.3% this time last year. And international sales increased 8% to £22.9 million. Revenue from UK stores and concessions rose 4% to £66.9 million and its international growth was 8% with revenue of £23 million. This segment now represents 18% of its total revenues. Its stores and concessions in Ireland and Spain performed in line with expectations and sales in the US also rose.
But the company must have struggled to shift product at full price and the profit figures were a whole lot weaker as the group gross margin fell to 60.7% from 63%. Underlying Ebitda was down 63% to £24.6 million and pre-tax profit fell 97% to £0.2 million. Net cash at the end of the period dropped to £7.5 million from £9.2 million, but the company seems to be working hard to keep its investors on-side. Despite underlying basic earnings per share being down 95% to 0.33p, the company announced a dividend per share of 1.2p.
And trading in the current year? Excluding sales from trading relationships that were terminated, sales have increased by 4%. And online growth on its own websites has continued, “albeit at more modest levels than experienced in the previous year.” But growth through its online and international business has been offset by a weaker performance through its UK stores and concessions “where we continue to see suppressed consumer spending.”
It's no surprise that International expansion remains a strategic focus both in existing markets and new territories. The company is currently in 22 countries on four continents with 125 locations and sees plenty of scope for further multichannel growth abroad.
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