Paul Scott said today7 Mar 2019 22:02
This sounds like management are in denial. When sales fall significantly below forecast, and they have to discount to clear stock, it means they got the fashions wrong. Simple as that. The first step to fixing that problem, is to admit it, which QUIZ doesn't seem to have done.
Online sales are up 16.2% - not bad
Physical stores (and concessions, which are mainly in Debenhams stores) are down a thumping 11.1%. Combine that with lower gross margins (to clear dud stock), and the fixed cost base of physical stores, and this will have a painful geared impact on the bottom line.
Previous guidance was as follows;
The Board previously anticipated that revenues for FY 2019 would be approximately £133.0m, which would have represented growth in sales in the final quarter of 9.2% compared to the previous year resulting in anticipated EBITDA* of £8.2m.
New guidance today;
Given the significant shortfall in sales experienced in the final quarter of FY 2019 to date, and should this trend continue throughout March 2019, the Group anticipates revenues for FY 2019 to now be approximately £129.0m.
It is also expected that the increased level of discounting will have a material impact on gross margins generated in the final quarter of FY 2019.
The Board now anticipates that the Group's EBITDA* will be approximately £4.5m for FY 2019.
It's still profitable on an EBITDA basis, so not a complete disaster.
Broker comments today are negative, as you would expect.
Balance sheet - is strong, so I don't see any risk of QUIZ going bust. Also, it has very short leases on its physical stores, so we can expect to see it jettisoning loss-making stores quickly & easily over the next couple of years - providing potential upside. The concessions in Debenhams are likely to be slashed, due to DEB's own store closure plans. I've mentioned before the bad debt risk, if DEB goes bust, which I estimate could be up to c.£4m - a significant risk.
My opinion - obviously this share has been an incredible disappointment, since floating in July 2017. It's now clear that the selling shareholders took advantage of an unsustainable period of good trading, to line their own pockets, in what is now clearly seen as an over-priced IPO.
However, everything has its price, and I think £18m mkt cap for a cash-rich, still-profitable fashion chain, with strong online trading, looks far too cheap. I don't think it's likely to go bust, due to the balance sheet & strength, and short leases.
A major sort-out is needed here. So divis are almost certainly likely to be cut, or abandoned altogether, and there are likely to be plenty of store closures, to restore profitability. I think deep head office cuts are probably also needed. Unfortunately, the company beefed up its central costs, anticipating expansion.
Overall then, a dismal situation, but it looks recoverable. Management are experienced rag traders, and should be able to turn this around. I don't see any rea
Sign In
Follow the stocks
