Fresh start lends new life to City Chic Collective

A change in name and structure has worked wonders for the company formerly known as Specialty Fashion Group (SFG), with its new incarnation finding the right fit in FY19.

After changing its name to City Chic Collective (ASX: CCX) in November last year, the group is now back in black and its share price is up by around 50 per cent.

Following on from a $9.3 million loss in FY18, the Sydney-based group notched a net profit after tax (NPAT) of $16 million in FY19 while sales revenue rose 12.6 per cent to $148.4 million.

City Chic managing director Phil Ryan says the first year as a standalone business has been an important and transformational one for the company.

"I am pleased to report 25 per cent growth in Underlying EBITDA for the year as strong trade continued into the second half delivering top line and comparable sales growth," says Ryan.

"Our EBITDA margin increased as our business continues to shift towards online, our most profitable channel, which is now 44 per cent of global sales."

The fashion group's online offering is now three times its in-store range, and the share of sales coming from the northern hemisphere has risen from 16 per cent to 20 per cent.

A store rollout in Australia and New Zealand is reportedly tracking to plan with the opening of nine new stores in the year.

"Our stores remain the largest touchpoint with our customers," says Ryan.

"In July and August we opened a further two new stores and have a good pipeline for the rest of the half.

"In the year we also converted three stores to larger format, giving us four in total. The larger format stores, which have a wider range, have been well received by our customers and are trading ahead of expectations."

While expansions have been underway, the group's 13 remaining Myer concessions have been closed, as well as one standalone New Zealand store.

In FY20 there has been positive comparable sales growth to date, and the group is now focused on rolling out another 20 stores in Australia and New Zealand over the next two years along with 15 conversions to larger store formats over the coming two to three years.

Expansions have also been slated within plus size and in terms of lifestyles and categories, while City Chic also intends to grow its US customer base and add new partners in the northern hemisphere.

Divestments and acquisitions

It has now been more than a year since City Chic's divestment of five brands (Millers, Katies, Crossroads, Autograph and Rivers) to Noni B (ASX: NBL), which incidentally also reported a positive result today.

The two companies have however butted heads over the terms of the sale, which included a post-completion adjustment mechanism for cash and certain limited working capital items.

Independent experts were brought in to determine the adjustment, providing a favourable determination for City Chic in June this year.

Shortly after in July, Noni B filed proceedings in the Supreme Court of New South Wales seeking orders setting aside the independent experts' determination.

"Notwithstanding that City Chic received a favourable expert determination, given the subsequent proceedings filed by Noni B, City Chic has been prudent and provisioned accordingly," City Chic said in its announcement today.

In April CCX acquired the assets of Hips & Curves for $2 million in a move that was expected to be earnings accretive as part of a strategy to grow market share in the USA.

"Hips & Curves is an online plus-size intimates retailer with a large customer following in the USA," the company said.

"The Hips & Curves website operates separately from the City Chic website in the USA and in addition to growing the customer base in the northern hemisphere, there are opportunities for cross-selling and supply chain efficiencies

Business News Australia