Quiz disappoints City as Christmas sales fall

Gerry Sweeney, chief financial officer, admitted the company “would have hoped to have done better” in the period, but insisted Quiz has cash in the bank and has “eliminated losses” from

the business.

The firm said net cash was £10.7 million as of January 4, compared with £12.3m at the same time last year.

Analysts disagreed and revised their views downward to predict the retailer was on track to make a full-year loss.

Panmure Gordon said it now expects the firm to make a loss before tax of £100,000 versus a previous forecast of a £500,000 pre-tax profit.

Glasgow-based Quiz revealed overall revenue slumped 9.3% in the seven weeks to January 4 as shopper numbers to its stores and department store concessions fell, while online sales

dropped 14.8%.

Trading for the retailer was in line with a gloomy report earlier this week from the Scottish Retail Consortium (SRC) and KPMG which reported a “bleak midwinter” for retailers. The SRC found the pre-Christmas rush failed to materialise after shoppers bagged bargains in November’s Black Friday sales online.

Mr Sweeney said strong sales in November declined in the traditional festive period.

“What we saw progressively was sales dipping below expectations as the month went on,” he said. “There was a factor of the consumer concentrating their spend on Quiz around that promotional activity around the Black Friday period.”

The worrying slump in online sales in the period was partly because they had cut unprofitable third-party sales through websites such as House of Fraser, which had the upside of underpinning margin, the company said. Growth in sales from the company’s own website was seen as a positive, with revenues increasing by 5.9%.

Mr Sweeney said Quiz remains committed to its portfolio of 73 stores and 171 concessions in the UK – as long as costs fall and they

remain profitable.

The company highlighted that the average lease of its store estate is 26 months, which it says is low compared to other retailers, while notice periods in concessions are between three and six months.

Although the company has cut concessions in House of Fraser department stores since it was acquired by Mike Ashley from 12 to seven, Mr Sweeney noted there had been an “uptick” in performance at these stores in recent months.

“As another retailer said, the problem is not necessarily too much space but too much cost when it comes to shops,” he said. “We still see a future for stores. There will still be a core of consumers that want to shop in store although that is a diminishing number. The cost base in stores needs to come down to reflect that, whether that is rent or rates or both.

“Reductions in rent renewals that have a happened in the current year have made a number of stores economical for us to remain in for a period of time. As long as we can get that we will keep the stores going. If we can’t make it economical, we will certainly exit from them.”

He added the company will take a “wait and see” approach to proposals to transfer the power to set non-domestic rates from central government to Scottish local authorities. Some would raise the property tax while others could reduce them, he said. “There will be a few local authorities that will see it as advantageous to put them either up or down, with different benefits to each strategy,” he said.

Arlene Ewing, at Brewin Dolphin, said: “The bad news continues for Quiz with a decline in revenues in its crucial Christmas update.

“Today’s statement will likely do little to ease the concerns of those in the City who have fretted about the business for some time – particularly the decline in online sales, which had previously been a bright spot. While it is undoubtedly positive that management is taking ‘proactive actions’ to improve margins and boost cost efficiencies, there is a lot that needs to be done to make Quiz capable of managing the challenges and changes faced by modern retail.”

Shares Quiz closed down. 17.3%, or 3.25p, at 15.53p.