Troubled plus-size retailer City Chic flags first-half loss as sales decline

Troubled plus-size retailer City Chic flags first-half loss as sales decline

While many retailers have enjoyed the economic boom spurred by the holiday season, plus-size fashion chain City Chic Collective (ASX: CCX) is anticipating a loss of $2.5 million to $4 million in the December half as revenue slumped through key sales events.

In an ASX trading update released today, the Sydney-based retailer said it expects sales to decline by eight per cent to $168.6 million year-on-year due to volatile trading activity during Black Friday, Cyber Monday, Christmas and Boxing Day – events that slashed gross margins as the group rolled out discounts and promotions.

Sales in the Americas recorded the biggest drop, falling by 14 per cent to $68.93 million, followed by a four per cent drop in Europe ($20.16 million) and three per cent dip in Australia and New Zealand ($79.46 million).

While online sales slumped by 21 per cent to $115.42 million, store sales surged to $35.86 million – reflecting a 27 per cent increase.

City Chic also noted higher fulfillment costs were still at play, which was flagged to shareholders at the company’s annual general meeting (AGM) almost two months ago.

At the time, the company saw fulfillment costs increase by roughly five per cent of revenue due to lower selling prices and transaction values, rate card increases from third-party logistics providers, as well as increased storage rates and returns in the UK and Europe.

The news comes after retailers such as JB-Hi Fi (ASX: JBH) and Super Retail (ASX: SUL) reported a massive surge in demand during promotional periods, with the former hitting a record $5.3 billion in sales for the December half.

“We maintain strong engagement with our core customer groups and are on track to deliver our strategic logistics initiatives,” City Chic CEO and managing director Phil Ryan said.

“Meanwhile we continue to focus on cost management and with the support of our lender have amended our debt facility in line with our changing business needs.

“We remain extremely confident in executing on our strategies and returning to profitable growth as these cyclical headwinds unwind. We thank our stakeholders for their support and look forward to progressing our vision to lead a world of curves.”

City Chic’s shares have tumbled by 85 per cent over the last 12 months, which was in part triggered by a huge build-up of inventories that concerned investors in August 2022.

In the latest update, the company confirmed its inventory was expected to sit between $163 million to $164 million at the end of the December half, which was below its guided range of $168 million to $174 million at its AGM.

“The group remains on track to deliver an inventory balance of $125 million to $135 million at the end of FY23 with purchases in 2HFY23 remaining flexible to demand fluctuations,” City Chic said.

“The group continues its strong focus on cost management reflecting the current macroeconomic uncertainty.”

City Chic’s update also comes two days after billionaire Brett Blundy revealed he purchased a 7.3 per cent stake in the company, sending shares up by 16 per cent on Wednesday off the back of the announcement.

Formerly known as Speciality Fashion Group (SFG), City Chic was one of six companies under the group’s portfolio prior to the sale of Autograph, Crossroads, Katies, Millers and Rivers to rival Noni B in July 2018.

After the acquisition was completed, SFG rebranded to City Chic Collective in November 2018.

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