QUIZ clothing

16th Mar '18 by Tortoise investor

16 comments 5884 reads

QUIZ (LON:QUIZ) clothing looks interesting to me. I was first attracted to it as a share because it has strong Boohoo.Com (LON:BOO) style advertising everywhere on the London Underground and I noticed more women in my office were browsing the site at work. This is a retailer towards the budget end of the highstreet with around 70 physical stores, primarily in the UK, around 170 concessions in the UK and Ireland, and a fast growing online presence. It focuses on women’s occasionwear, although other everyday product lines are also available, so its market cap (c. £160m) will probably not reach the same dizzy heights as e.g. Boohoo.Com (LON:BOO). Like Boohoo.Com (LON:BOO) it focuses on a “just in time” model of fashion and is also headquartered in the UK. However, compared to other fast growing shares, its p/e ratio is more modest at around 17 based on 2019 estimates which look like an underestimate to me. This follows a fairly consistent fall in share price since it IPO’ed in 2017.

I’ve written a short summary below and would welcome others’ views. I hold a small amount of shares since buying at 129p.

BULL POINTS:

The company is experiencing good revenue growth. In the six months to September 2017 growth was 35% and at Christmas it was 32% compared to the same periods in 2016.
Online revenue growth is even stronger but note that this has been from a low base as the company seems to have been a bit slow to adapt to online. 6m to September 2017 was 205% growth and 119% at Christmas 2017. That’s a fall but they have been pushing their online channel over the last year or two so I have assumed (without probing too much) that the Christmas fall in growth is due to a higher comparative in Christmas 2016. Its growth strategy focuses on online opportunities and developing international websites. I think its website is very easy to use and browse.
H1 2017/18 EPS grew 35% yet brokers’ estimated 2018 EPS of 6.35p assumes EPS growth of 19%. So I think there is a good chance of this being beaten unless costs are significantly higher (not impossible given high street pressures).
No debt.
It has a…

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Carey Blunt

17th Mar '18

I think Paul is always saying that the thing to look for with this type of company is the amount they are spending on the advertising to get the growth and to look to see if that is sustainable. If they are growing but having to pay heavily for the advertising to do it then the danger is the money will run out before the momentum gets to a point where they can turn off the advertising tap and still attract customers.
I’ve not looked at quiz to see what the ad spend is but I think if I was looking at this I would start there,
Cheers

Zipmanpeter

18th Mar '18

Interesting to compare QUIZ (LON:QUIZ) vs say N Brown (LON:BWNG).

QUIZ (LON:QUIZ) is mostly retail stores and competes in pretty much the same space as BooHoo, Very and so many other compeitors. What's more, new to the market and only £100Mn in scale

N Brown (LON:BWNG) has now become 70% online with all digital processes and no stores (now). It has focused brands on less contested parts of the market (the older and larger demographics), pays a good dividend and has a long history

Alternative and even better is £NEXT....

So why invest in QUIZ (LON:QUIZ)

andrea34

19th Mar '18

I don't see why Next (LON:NXT) are even better than QUIZ (LON:QUIZ) considering that within the last twelve months they have issued more than one warning about subdued trading, with the latest indicating sales are pretty much stagnant and profits will be down over 8%. The Xmas update from QUIZ (LON:QUIZ) was substantially more positive, with sales up over 31% and gross margins inline. I feel the only thing propping up the price is the yield, and buybacks, at this stage.

I am a holder of QUIZ (LON:QUIZ) (but not Next (LON:NXT) ), and have been rather disillusioned by the steady fall in price; the small amount of money from the IPO ploughed back into the company was a worry. I haven't bought many items from QUIZ (LON:QUIZ) as at my age I am not one who's wardrobe demands a substantial amount of occasion wear, but last year I bought a beautiful top which I regularly wear and before that a nice dress for everyday wear; the quality of both as been fine. I think their non-occasion-wear offering is pretty much on-trend, while also a little bit distinctive from the main stream.

Tortoise investor

Because QUIZ (LON:QUIZ) has strong growth. As mentioned above their Xmas revenue growth was 32% compared with e.g. N Brown (LON:BWNG) that reported growth of 3.2%

Thanks for comments. I think fashion has to be one of the most contested areas out there where small size competitors can compete via style whilst big ones can leverage purchasing. Many routes to glory and defeat!

What makes QUIZ (LON:QUIZ) different? I am not a fashion guru but their offering looks nothing special and ocassion wear probably has a structurally higher return rate - more costly and some element of deliberate buying intending to return ! QUIZ grew now but why will they keep on growing fast? Online has to go ballistic for them vs tough better known competitors and a mass of others. Also how good are the stores?

I feel £Next will not be exciting but that they will continue to grow online as mass market goes there and have probably the best invested/most profitable retail estate to navigate a re-ordering and shrinkage of High St. (eg I think a decent chunk of M&S buyers may go to Next as M&S continue to fall) Their middle of the road fashion range may not excite but will likely keep selling in all weathers. Steady dividends/buybacks will keep the investment case chugging.

N Brown (LON:BWNG) are riskier but I hope/believe they are now set to be a scaled, multi country near pureplay online success. They are also ever more focused on less contested niches as their 'power brands' grow faster than the base - although I would be happier still if they dropped the electronics goods and other non clothing/fabric items from their product lists.

I guess for all, design quality/value can deliver success but business model wise I think QUIZ is the riskiest; especially as owners took cash out. We will see !!

Albertos

Have never understood the Next (LON:NXT) fan club.

Ten years ago or more they had it in their grasp to become the dominant online force using their Next Directory base - they blew it by directing the vast majority of their free resources to share buy-backs. They gave ASOS (LON:ASC) , Boohoo.Com (LON:BOO) etc the space they needed.

What are they doing now after a mediocre/difficult year - more buy-backs. When the money runs out there's not a great deal left.

Next (LON:NXT) is not IMHO a good benchmark for the retail sector.

Phil

14th Apr '18

In case of interest I have looked at H2 2017/18 growth based on Thursday's release.

TOTAL REVENUE:
- H1 2017/18 = 35.2% growth
- XMAS 2017 = 31.9% growth
- H2 2017/18 = 24.8% growth

ONLINE REVENUE:
- H1 2017/18 = 204.6% growth
- XMAS 2017 = 119% growth
- H2 2017/18 = 127% growth

The slower total growth in H2 is partly a reflection of its online presence maturing but I was interested that it was noticeably lower than the Xmas period. So perhpas a slowdown in store revenue growth is the main issue which could be due to the poor weather (which might explain why online revenue for H2 was higher than the Xmas period but the opposite was true for stores).

Overall the growth numbers still look impressive.

Mike888

I've been watching this stock since it floated, continually patting myself on the back for not buying it on my first impulse, but with the intention of probably owning it one day once I saw some faith from the market. That faith seems to have occurred recently, but for some reason, I find myself not buying the stock, and to be honest I'm not quite sure why.

I asked my wife what she thought of the clothes on a trip to Debenhams some months ago explaining that I was considering investing at some point in the future.She was quite impressed with the price and that she would consider buying something for the occasional event, but noted that the price of the clothes was probably comparable with the quality, it was not Joules for example.

So I wait on the sidelines trusting my gut instinct rather than what I'm seeing on paper, I may kick myself, time will tell.

15th Apr '18

I don't know your wife but I am not sure she is their target market! The quality of the clothes doesn't look good but that has't stopped Boohoo.Com (LON:BOO) and Next (LON:NXT) from doing well!

11th Sep '18

In case anyone stumbles across this old post: I've since become worried about Quiz's exposure to Debenhams (LON:DEB) and have included some commentary here: https://www.stockopedia.com/content/small-cap-value-report-tue-11-sep-2018-placeholder-ampampamp-jd-bry-luce-upgs-mai-blv-sbiz-397619/?comment=29#29

20th Oct '18

The recent falls here look way overdone, even with the Debenhams (LON:DEB) risk I posted above. It is now trading at 8x broker estimates for 2019! This is despite the fact that:

- The company says that following September store revenue difficulties and third party website revenue growth slowdown, they still expect revenue growth of 15.6% for FY2019.
- Superdry (LON:SDRY) recently said they saw a slowdown in September as shoppers delayed autumn/winter purchases due to the warm weather. Maybe the same happened at QUIZ (LON:QUIZ)
- Online growth is still fast (especially own website) and the company is doing some great marketing in London
- The company had net cash of £9.2m at end of FY2018. That's 15% of the market cap.

Where else on the market can you find a company with these qualities, with growth ambitions, trading at broker estimates of 8x ?!

In a recent post Paul Scott questioned whether the product ranges are just poor. They might be poor quality but that hasn't stopped Next (LON:NXT) or Boohoo (LON:BOO) and their rubbish clothes. If the ranges were poor then the website sales would also surely have ground to a halt.

As should be obvious I have bought back in and plan to top-up again this week. This is now well into value territory. I think there are still risks such as with Debenhams (LON:DEB) and clearly the update in November will be crucial but the SP now reflects the risks in my opinion. Plus Debenhams (LON:DEB) should limp on a bit longer yet!

daveinthelakes

21st Oct '18

Hi,
Do you know the average length of lease liability for their stores? Next (LON:NXT) and Superdry (LON:SDRY) generally won't sign up for terms more than 5 years or have a tenant break clause at 5 years if a longer lease. As the leases are on rolling renewals it enables them to reliquish a large part of the bricks and mortar liabilities quickly. It also helps negotiate better deals with landlords who are desperate for them to stay.

As a newer retailer which has undergone rapid store growth I would be concerned if Quiz had lease liabilities stretching over a longer timeframe? It is also possible that some of the earlier leases may be at unsustainable rentals?

Thanks, Dave

robbiep

See below

At flotation in August 2017 it was an average of 30 months. It should now be around 16 months on those stores.

5th Nov '18

Looking at their 2018 annual report they say about a third of their non-cancellable leases (I don't have the expertise to know if there would be cancellable ones?) expire in less than one year but the bulk between 2-5 years: http://www.quizgroup.co.uk/wp-content/uploads/2018/08/180803-QUIZ-plc-Annual-report-and-financial-statements-2018-FINAL.pdf (page 70).

Wimbledonsprinter

19th Dec '18

I would think that virtually all the shop leases will be less than 5 years. As you point out the annual p70 shows that lease commitments of more than 5 years are only £899k (as of March 2018). In the Admission Doc (p102-4), it states that then 10 year leases were held on the Glasgow HQ and the Glasgow Distribution Centre (where the landlord is a related party, hence the extensive disclosure).

The current price of QUIZ is tempting, given the net cash and that it updated the market last on 27 Nov, that should have taken into account the “retailing November from hell”. Apart from the awful trading conditions, the two dark clouds I see on the horizon are:
1) the falling share price of Debenhams would indicate that a restructuring could be imminent. Is there a better way of estimating the hit to QUIZ than saying it could be 10x the £0.4m hit taken from HoF restructuring (approx 10x the stores)? Obviously, if DEB stores were actually to close, there would also be a fall in revenues (and associated profits).
2) The introduction of IFRS16 will make the balance sheet look very different (and a lot larger) than it does now. As far as I can see, QUIZ has given no guidance on this - maybe I have missed it somewhere.

QUIZ clothing

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