Glagsow-based fashion retailer Quiz swung to a six-month deficit after accepting a £7 million impairment on loss-making stores.
Online sales remained flat at £20 million and half-year underlying profits crashed from £4.2 million to £0.6 million. Revenues were down 5% for the six months to September 30 from £66.7 million to £63.3 million.
The firm said that over the next two years it would be able to renegotiate or terminate leases in 50% of its UK stores. It had set aside the £7 million to write off cash spent fitting out failing outlets and paying off the remaining leases, resulting in a group loss of £6.8 million.
Founder and chief executive officer Tarak Ramzan said: "The Group's performance has resulted in an underlying profit before tax of £0.6 million. Whilst it is disappointing to report a decline of profits year-on-year, management are focused on implementing the actions identified further to the Group's business review conducted earlier in 2019. We are pleased to report progress improving gross margins and reducing costs across the business, and will look for further improvements to develop our omni-channel offering.
"QUIZ has continued to achieve sales growth in its international business and, in particular, online despite the challenging trading conditions. This has been supported by effective marketing investment including a successful collaboration with TV star Samantha Faiers."
Quiz has suffered along with many high street retailers and issued a string of profit warnings this year. Despite that, in the last six months it spent nearly £1 million opening two new stores while opening nine concessions and closing seven others. It took a £400,000 hit from the collapse of House of Fraser, where it operated concessions.
Ramzan added: "The Group has continued to generate cash and had £7.2m of cash at the period end. The Board remains firmly focused on further improving the Group's financial performance and growing revenues with a strong focus on QUIZ's online and international channels.
"The exceptional charge incurred in relation to store impairments and onerous leases is partially attributable to the structural shifts whereby consumers are increasingly shopping online. We have a clear customer focus, a healthy brand and a flexible model that the Board believes will enable QUIZ to adapt to the changing retail environment and return to profitable growth in the medium term."
Quiz said sales were up 7% with growth in its franchises in the US and Middle East. In October the company unveiled plans for a cost-cutting exercise to save between £2 million and £3 million a year, with a bigger push towards online sales. The dividend was also scrapped.
John Moore, senior investment manager at Brewin Dolphin, said: “These results are a bit of a nightmare before Christmas for Quiz. Revenue decreases at its bricks and mortar offering is not a particular shock; however, flat online revenue to mitigate that loss is a shock and disappointment.
"The City has been worried about Quiz for some time now and today’s figures will do little to ease those concerns. The implementation of its root and branch review will be absolutely critical to Quiz’s future prospects – there is a significant amount of work to be done to make the brand distinct, self-sufficient and capable of handling the wider challenges in retail.”
