LONDON (ShareCast) - (Sharecast News) - Shares in fashion brand Quiz crashed on Thursday as it warned on profits for the second time this year following a disappointing start to 2019.
In an update for the period from 1 January 2019 to 28 February, the company said group revenue fell 1.7% compared to the same period a year earlier, with a 16.2% jump in online revenue offset by an 11.1% drop in revenue from the group's UK standalone stores and concessions.

Quiz said it has had to apply bigger-than-expected discounts to clear excess stock amid a significant shortfall in sales during the period. This is expected to have a material impact on gross margins generated in the final quarter of FY 2019.

As a result, Quiz now expects FY19 revenues to come in at around £129m, down from the £133m it estimated in its update in January and 2018's £116.4m. Meanwhile, full-year group earnings before interest, taxes, depreciation and amortisation are expected to be £4.5m, versus a previous forecast of £8.2m.

Quiz said that given the recent trading performance, it is instituting a thorough review of all aspects of the business with a view to mitigating the effects of changed trading conditions.

Chief executive officer Tarak Ramzan said: "Whilst the board remains confident in the strength and appeal of the Quiz brand, as demonstrated by our continued sales growth online, this has been a highly disappointing trading period for the group.

"As a result, the board will be reviewing all aspects of the business over the coming months to ensure that we can deliver the group's long-term potential despite the changing consumer backdrop and challenging trading conditions."

At 0925 GMT, the shares were down 51% to 15.75p.

Paul Hickman, analyst at Edison Investment Research, said: "One of the attractions of Quiz was always that it is well established, with a terrestrial estate and experience of its market stretching back to its first store opening in 1993. Management has done much to integrate the store estate with its online offering and its significant social media presence.

"However, today's warning shows that, in the end, those actions have been insufficient to protect the physical offer above the market's pervasive shift away from physical retailing."

Neil Wilson, chief market analyst at Markets.com, said Quiz's third profit warning in less than six months is a "humdinger".

"As I said in January when the last warning was issued: It looks like discounting is really killing retailers...There is just no way they can pass on higher costs by raising prices. Consumers are simply not prepared to pay more. The discounting vicious circle means shoppers are now expecting big price reductions. Margins at Quiz are, like others, coming under a lot of pressure from heavy discounting."

Peel Hunt said "the road back will be a long one" as it downgraded its stance on the stock to 'sell' from 'hold' and slashed the price target to 12p from 25p.

"The travails at Debenhams and House of Fraser won't have helped but there is a fundamental problem here that the ranges are just not resonating with customers. Occasionwear has been especially weak. The sales miss has bred a margin miss as the excess stock has to be discounted.

"The business is now in day-to-day losses and with little strategic inspiration emerging with this profit warning, we can only assume that it will be a very long road to recovery. EBITDA may be positive next year but pre-tax losses are assured, and there seems very little reason to hold the shares, even at the lowly levels they will plumb today."

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