Shares of Glasgow-based fashion firm Quiz fell more than 30% late on Friday after it said its revenue for the full year to March 31, 2019, would be lower than current market expectations.
Quiz said that should the trend in online third-party sales continue during the second half of its financial year, group revenue for the full year would be lower than current market expectations at £138 million and the group’s full-year EBITDA would to be in the region of £11.5 million.
In a trading update for the for six months to September 30, 2018, Quiz said group revenue increased 19% to £66.7 million despite “challenging” external trading conditions.
“Sales in the group’s UK standalone stores and concessions increased by 9% to £35.1m in H1 2019 (H1 2018: £32.3m),” said Quiz.
“Sales were particularly strong through this channel during the summer months, however the group experienced a lower sales performance across its stores and concessions during September reflecting less footfall.
“As previously reported, further to House of Fraser’s entry into administration and the selective acquisition of assets by Sports Direct International plc, the group will provide £0.4 million in the six months to 30 September 2018 in relation to outstanding debtor balances and other potential costs.
“Online revenue increased by 44% to £20.0m in H1 2019 (H1 2018: £13.8m) reflecting investment in our online platform, effective marketing and the appeal of our ranges.
“In line with our strategy and as anticipated, the group generated strong online growth through Quiz’s own websites where sales increased by 70% year-on-year.
“Online sales through the group’s own websites carry a higher margin than online sales through third-party websites.
“Online sales through third-party websites were at a similar level compared to H2 2018.
“This performance was behind our expectations and declined during the second quarter of the financial year.
“We are working closely with our third-party online partners to try to address this trend during the second half.
“The Quiz brand continues to grow across its target international markets with the international sales increasing by 16% to £11.6m in H1 2019 (H1 2018: £10.0m) largely underpinned by growth in our international franchise operations.
“The group is pleased with the development of sales in the USA at this early stage and the benefit of franchises opened in other international markets in the previous year, along with the revenues generated from the three standalone Spanish stores which opened last Autumn.
“Gross margin for the period is expected to be in line with the board’s expectations.
“The board anticipates that, as a result of lower than expected sales through third-party online partners in the second quarter of the financial year, the performance of our UK stores and concessions during September and the provision against the outstanding House of Fraser debt, EBITDA for H1 2019 will be not less than £5.5m, being £1.5m lower than its previous expectations.
“In addition, the board has taken the prudent assumption that should the trend in online third-party sales continue during the second half of the financial year, group revenue for the full year to 31 March 2019 would be lower than current market expectations at approximately £138m (FY 2018: £116.4m) and the group’s EBITDA for FY 2019 would to be in the region of £11.5m.”