Quiz profit tumbles amid 'challenging' trading conditions

Quiz shares tanked on Tuesday after the fast-fashion brand scrapped its dividend and posted a near-100% drop in full-year profit amid "challenging" trading conditions.

In the year to the end of March 2019, pre-tax profit tumbled 97% to £0.2m as the group took a £0.4m bas debt provision from the administration of House of Fraser. Quiz also pointed to a drop in high street footfall and weakened consumer confidence amid "extreme levels of macroeconomic and political uncertainty".

Underlying pre-tax profit during the year fell 94% to £0.6m as the company undertook additional promotional activity to clear stock, a move that resulted in lower gross margins. Group gross margin was 60.7%, down from 63% in 2018.

Group revenue in the year rose 12% to £130.8m, with online revenue up 34% to £41m and international sales 8% higher at £22.9m. Revenue from UK stores and concessions increased 4% to £66.9m.

Online sales represented 31.4% of group revenue compared to 26.3% the previous year and the active online customer base rose 56% to 576,000.

Given the drop in profit and as a result of the business review undertaken in recent months, Quiz suspended its dividend payments "to restore profitability and support the growth of the business".

Chief executive officer Tarek Ramzan said: "Despite the challenges faced by the group during the period, Quiz's focus has remained as strong as ever on delivering great products at outstanding value, thereby strengthening our brand's positive reputation amongst a growing customer base. As a result, we have continued to achieve sales growth across our omnichannel model both in the UK and internationally.

"As announced in March, the board and senior management team have carefully reflected on our business, strategy and prospects to ensure that we are able to navigate what remains a volatile trading environment and restore profitable growth. We have concluded this review process with 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."

Neil Wilson, chief market analyst at Markets.com, said: "Quiz just hasn’t grown enough to match the investment it made in infrastructure. After issuing a profits warning barely a year after floating you kind of always had one eye on this one.

"Cost have soared by the volumes just haven’t been there to match. Lower sales volumes have also led to heightened promotional activity which has hit margins, which declined more than two percentage points to 60%. Retail is all about margins and Quiz is failing this test right now."

At 1000 BST, Quiz shares were down 23% at 21.40p.