After selling its e-commerce store Avenue in the US last year, plus-size women's clothing retailer City Chic Collective (ASX: CCX) has revealed it may exit the American market altogether if tariffs on Chinese goods make its business unviable.
City Chic, which has 76 stores in Australia and New Zealand and retains a strong online presence in the US, has revealed that despite the tariff walls going up on its US operations it remains well positioned to weather the storm until the end of this year.
The group generates about 20 per cent of annual revenue from the US and the company is expected to be hit hard by the 145 per cent tariff on goods from China, where City Chic sources about 90 per cent of its products.
However, the bulk of City Chic's 2025 summer range and a significant portion of its 2026 winter collection have already been forwarded to the US ahead of the tariffs being put in place.
“This proactive approach ensures that sufficient pre-tariff inventory is currently on hand and will sustain operations through Q2 FY26, allowing further time to plan,” says City Chic.
“The group is actively working with its suppliers to manage the existing order pipeline and has, for the time being, paused all further stock entering the US market.”
City Chic says it is “monitoring all peer retailers” in the US that source products from China, many of which it reveals are planning to increase prices in response.
“While the group will continue to closely monitor market developments, in the current economic climate, it does not believe that it will be feasible to raise prices sufficiently to entirely offset tariffs in the USA without materially impacting demand,” says the company.
City Chic notes that US tariff rates have been revised several times in recent months and could change again, but “as things stand they add 145 per cent to the historic average duty rate of 27.5 per cent on our USA product”.
“Given the economic uncertainty and fluidity of potential tariff negotiations, it is not yet possible to provide a reliable estimate of the impact on the revenue of the USA business for the remainder of FY25,” says the company.
City Chic, in discussion with its suppliers, says it is looking at ways of mitigating the impact of higher tariffs should this situation remain in place over the medium to long term.
“Due to restructuring of the business and the variable nature of the cost base, the group has the option to exit the USA with minimal costs if the tariff situation remains uncommercial,” the company says.
The threat to exit the US follows the company's sale of fashion label Avenue last year to Fullbeauty Brands for $18 million, which came on the heels of an earlier withdrawal from Europe with the sale of UK brand Evans to AK Retail for $15.5 million.
Due to the ongoing uncertainty, City Chic has revealed that it is likely to deliver a financial performance at the lower end of forecasts made earlier this year which targeted revenue of between $137 million and $147 million and EBITDA of between $8 million and $12 million for FY25.
“While management will use the low end of this range as its target for the remainder of the financial year, the current volatility and uncertainty puts this result at risk and results could fall short of this target,” says City Chic.
The company says trading for the first 18 weeks of the current half year have delivered total revenue growth of 8 per cent compared with the same time last year.
Revenue from Australia and New Zealand is up 17 per cent, while the US is 13 per cent lower – a drop that also reflects the sale of the Avenue business. US business costs have been cut by $1.5 million to reflect the fall in sales.
While customer numbers in Australia and New Zealand remain strong, with online and store traffic positive, City Chic says growth in the local markets has been lower than expected.
City Chic has affirmed that it is on track to have 78 stores operating in Australia and New Zealand by the end of this financial year.
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