City Chic will post a first-half loss as sales fell and margins deteriorated
Its shares are down 85 per cent in the past year and City Chic now forecasts another loss during retail’s busiest period.
City Chic says it expects to have crashed to a loss of between $2.5m and $4m for the 6 months to December 31, revealing the full pain of the period as it faces a slump in sales and intense competition.
The plus-size women’s fashion and apparel retailer warned on Friday that it expected group sales for the December half to be down 8 per cent to $168.6m as volatile trading activity through key sales events like Black Friday, Cyber Monday, Christmas and Boxing Day sales required more discounting and promotions that eroded its gross margins.
There was also a spike in its costs of doing business, first alerted at the company’s annual meeting. This remained elevated and would result in a higher cost of doing business as a percentage of sales for the half, it said.
“The combined effect of reduced revenue and gross margin, and higher fulfilment costs, is expected to result in an underlying EBITDA loss for the first half of fiscal 2023 of between $2.5m-$4m, subject to finalisation of ordinary accounting period-end review and audit,” the retailer said in a trading update.
Sales in Australia and New Zealand were expected to be down 3 per cent to $79.46m, sales in the Americas down 14 per cent to $68.93m and in Europe sales would be down 4 per cent to $20.16m. Online sales fell 21 per cent in the half to $115.4m.
City Chic, which operates stores in Australia as well as online in the US and Europe, has had a difficult 12 months that has seen a string of profit warnings. Shares in City Chic are down 85 per cent over the last year.
However, City Chic this week found an influential investor with billionaire Brett Blundy revealing he had bought up a 7.3 per cent stake, sending the shares 16 per cent higher in one day.
A key problem plaguing City Chic over the last year has been a huge build up in inventories which concerned analysts, with many fearing the retailer would be stuck with excess stock and eventually be forced to sell it at cut down prices that would destroy its profit margins.
On Friday in its trading update City Chic said it confirmed its inventory was expected to be between $163m-164m at the end of the December quarter.
City Chic has amended its debt facility to $46.5m and increased the amount available for working capital, the company told investors on Friday.
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