Quiz (LON: QUIZ) shares are down 40% today. QUIZ shares are also down 63% on the last 6 months. The essential and basic problem is that fast fashion is becoming increasingly competitive. The Chinese giants are extending into the overseas markets and bringing their market buying massive discount policies with them. This obviously eats away at the revenues and margins of the extant players in those same markets. It’s what it’s intended to do after all, to buy market share with pricing.
This has its effects, as detailed by Quiz: “Since then, inflationary cost pressures have continued to impact consumer confidence and demand for QUIZ's products. As a result, overall revenues in the year to date have continued to be lower than the previous year and below management's prior expectations.” Well, yes, it’s easy enough to blame macroeconomic conditions - they apply to everyone of course.
But the effect here is to: “Whilst it is too early to determine with certainty, the Board has taken the prudent assumption that should the current trend in revenues continue during the second half of the financial year, FY 2024 Group revenue would be c. 6 to 7% lower than current market expectations (FY 2023: £91.7m). This will have a knock-on impact on the Group's profitability and whilst it is anticipated that a positive EBITDA would be generated, if revenues were at these levels, it would be expected to result in a loss before taxation for the year of no more than £1.5 million (EBITDA FY 2023: £6.2m and FY 2023 profit before taxation of £2.3m).”
Quiz share price from Google Finance
We would say that we’re ever so slightly hesitant about that conclusion. For we’re deeply unconvinced that retail woes are due entirely to macroeconomic conditions. We think there’s a considerable microeconomic influence as well. We’ve got the irruption of Shein and now Temu into the marketplace. These Chinese giants are losing billions through discounting in order to win market share. We don’t think that influence is going to go away anytime soon now either.
Now of course this is merely opinion from us, this is not a statement of fact. But our impression is that fast fashion universe is going to be under unrelenting pressure for some years to come. It’s not just the economic cycle here, there’s a structural change happening in the marketplace.