Fashion giant City Chic Collective stocks up to outrun supply issues

Plus-size fashion retailer City Chic will use more of its available cash to boost stock for seasonal and key sales periods to manage supply bottlenecks.

City Chic is set to report strong first-half results on revenue growth.

Fiercely acquisitive plus-sized women’s fashion retailer City Chic Collective says first-half revenue growth is strong across all operational regions in Australia and overseas despite pandemic-related labour shortages, impacts to global logistics and supply chains and lockdowns.

And second half earnings are expected to be stronger than first half.

Shares in Sydney-based City Chic, which has a market capitalisation of $1bn, are trading up 11.9 per cent to $5 at 12pm AEDT.

Unaudited sales revenue for the 26 weeks to December 26, representing its first half for financial year 2022, is $178.3m, up 49.8 per cent on the previous period due to contributions from its UK-based Evans and Germany-based Navabi acquisitions.

Revenue growth was also supported by the strategic investment in inventory to proactively manage the risks associated with global supply chain volatility, driven by freight capacity shortages and delivery delays.

Comparable sales growth is 44 per cent, excluding the wholesale and online marketplace, the acquisitions and periods of extended store closures due to lockdowns.

Underlying earnings before interest, taxes, depreciation and amortisation is expected to come in between $22.5m and $23.5m in line with the prior corresponding period.

“This was pleasing as it included a $4m EBITDA impact from store closures, the impact of acquisitions and COVID-19 related marketing and cost reduction measures taken in the prior comparable period,” the business told investors.

That figure excludes a $1.7m expense related to its Navabi buy.

Chief executive and managing director Phil Ryan said the business is continuing to drive growth across regions while adapting the business to address the ongoing challenges.

“While we acknowledge the environment remains uncertain, the performance of the business to date demonstrates the team’s ability to navigate volatile market conditions.

“The particularly strong performance in the USA demonstrates our potential to capture and grow our share of international markets.

“The global opportunity for City Chic is stronger than ever and we continue to experience growing customer demand across our multichannel offering.”

The $178.3m first-half revenue includes an $80.3m contribution from the Australian and New Zealand markets, $77.2m from the Americas and about $20.3m from the Europe, the Middle East and Africa (EMEA) region.

The cash balance was $40.5m at the end of December 26 with no debt drawn.

The business said it would use more of its available cash to boost inventory for its Northern Hemisphere summer season and key sales periods – a strategy that supported sales growth in the US and Australia through the critical Black Friday and Christmas trading period.

Post the balance period, City Chic completed its buyout of the assets of US marketplace CoEdition, which will be integrated into its US platform in January.