Scottish fashion chain Quiz has warned that deteriorating income means it may make a loss for the current financial year.

In July the company announced a "strong recovery" for the year to March with pre-tax profits of £2.3m, up from £800,000 previously. However, that was followed by a double-digit decline in sales in the first quarter of the current financial year.

"Since then, inflationary cost pressures have continued to impact consumer confidence and demand for Quiz's products," the company said. "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."

During the five months to the end of August Quiz recorded an 11.5% decline in store sales to £19.3m, while online sales slumped by 23.8% to £10.9m. International sales were 10.5% lower at £6.8m.

READ MORE: Problems mount up as Quiz sales stuck in the doldrums

The group has 64 stores and 61 concessions in the UK. It has a further five stores and 21 concessions in Ireland that make up its international division.

Quiz said if the current trend in revenues continues into the second half, full-year revenues will be 6-7% lower than current market expectations resulting in a pre-tax loss of "no more than" £1.5m.

"Whilst the impact of cost of living pressures on consumers' disposable income persists, management continues to retain a tight control on costs and is proactively reviewing all aspects of the business to mitigate the impact of the current economic and trading environment on the group and identify potential strategies to drive additional revenue growth," Quiz said.

"Longer-term, the board remains confident that Quiz's product proposition and commitment to providing glamorous looks at value prices will continue to appeal."  

The 12% decrease in revenues from the group's UK stores and concessions was said to reflect a decline in footfall relative to the previous year when traffic was buoyed by the lifting of lockdown restrictions.  

Sales through Quiz's own websites fell from £10m to £7.4m, with sales through third-party websites totalling £3.5m , down from £4.3m. Average transaction values increased during the latest period, but revenues were adversely impacted by a decline in web traffic and an increase in return rates.

International revenues from its Irish stores and concessions amounted to £2.4m, down from £3.0m. Revenues from international franchise partners amounted to £4.4m versus £4.6m previously. 

READ MORE: Quiz: Scottish fast fashion group warns of sliding sales

Quiz said it has been focused on preserving its balance sheet and maintaining an appropriate net cash position, with total liquidity headroom currently standing at £6.4m, down from £8.3m in March. Within this, cash balances fell from £6.2m to £3.2m.

The company also has £3.2m of undrawn bank borrowing, with the group noting that its total facility of £4m is due to expire in June of next year. 

Originally set up in Glasgow in 1993 by chief executive Tarak Ramzan, Quiz debuted on London's Alternative Investment Market (AIM) in 2017 with a flotation value of £200m. Mr Ramzan's family was elevated to the ranks of Scotland's richest after selling a combined £92m stake in the business.

It went into administration in 2009 as the high street climate deteriorated in the wake of the banking crisis. Mr Ramzan and his family immediately bought back the vast bulk of the business through a pre-pack deal.

Lockdowns during the Covid pandemic created further obvious challenges as Quiz, which deals mainly in occasion and dressy wear for a younger audience, suffered a slump in sales and a pre-tax loss of £9.6m for the year to March 2021.

This triggered the administration of Kast, the Quiz subsidiary in charge of the company's physical store estate. The administration led to the immediate closure of 11 stores and 93 job losses, with Kast’s stock and some assets sold in a pre-pack deal to Zandra, another Quiz subsidiary, for £1.3m in cash.

The company has spent £1.3 million in recent months upgrading its distribution centre, and has also invested in the store portfolio with three new shops opened, one closed, and three that have relocated.

Shares in Quiz closed yesterday's trading 2.78p lower at 6.05p, a decline of 31.4%.