Having warned the City in July that it was suffering from the low-price policies of competitors, QS Holdings yesterday duly produced the results to prove it. Profits before tax in the six months to July collapsed from pounds 3.86m to pounds 1.58m and, while sales rose from pounds 23.2m to pounds 24.6m, excluding new space they fell 11 per cent.
Competitors were not the only problem. A 20 per cent rise in the dollar meant the cost of sales rose 15.7 per cent, a new warehouse and store openings meant distribution and administration costs increased by a quarter and poor weather in May hit sales of all-important T-shirts.
There were some bright spots. Sales in the first nine weeks of this half are running 2 per cent ahead. A pounds 2.7m cash outflow was due to the purchase of freeholds, and the pounds 7.8m cash left in the bank means shareholders can be reasonably confident that the final dividend will, like the interim, be held.
Having sent the shares down from 305p to 235p after the profits warning, the City was happy enough with yesterday's news to push them up 10p to 200p.
There must, however, be a lingering fear that the problems are as much due to over-expansion and stretched management as to competition.
That makes the shares, on 23 times earnings if the pounds 5.25m forecast is achieved, look risky.