Clothing retailer City Chic Collective [ASX:CCX] has revealed group sales have bumped down by 15.2% for the first 45 weeks of the year — totalling $262.2 million.
However, the group also said it has been progressing with a strategic review to focus on growth online and internationally. Despite the lower sales so far in the year, City Chic believes that its revenue trajectory still shows some strength in achieving a positive cash position by the end of FY2023.
After posting these results, the clothing group saw its stock plummeting by more than 10% on the share market — worth 34 cents a share at the time of writing.
Over the last 52 weeks, CCX has slid 86% in its stock value:
Source: TradingView
City Chic talks strategy and inventory on low sales
City Chic said that sales, while down year-on-year, still held up with a 16.4% gain on FY21.
January and February revenue took a 17% decline against the previous corresponding period (PCP). Promotional levels increased in line with the competition, and the clearing of products was ahead of its warehouse consolidations program.
The company also said revenue was affected in the US with the transition which took place in March — involving its new 3PL facility as the group reduced its promotional activity to avoid excessive delivery times and ensure better customer experiences.
City Chic anticipates a return to more normal promotional activity in Q4 with the change in season.
Promotional activity has reduced in the UK and ANZ. However, the group said this impacted conversion rates with consumers not responding as expected.
Sales in April and into May have begun to improve and are now returning to trends seen in January and February.
However, in the UK, operating conditions have remained exceptionally challenging, and heavy discounting has had to drive demand.
The group drew attention to the $46.5 million support from its debt facility lender, which has been amended to allow a staged reduction in the facility limited to $21.5 million by the end of the next financial year.
The company believes that this secures working capital for the business to return profitable growth through FY24.
CCX believes its current trajectory will remain on track to achieve a positive net cash position for the end of FY23.
The group has decided to accelerate its inventory unwind, focusing on Europe, Africa and the Middle East to drive cash flows and take its inventory balance down to less than $100 million by the end of the year.
CCX CEO, Phil Ryan said:
‘Operating conditions have remained challenging, resulting in the continuation of strong promotional activity across the market. We responded to drive demand and clear excess inventory lines, focusing on converting inventory into cash while reducing costs. After the disruption to our supply chain in March it is pleasing to see revenue improving.
‘The strategic review will build on the actions we’re taking to strengthen our balance sheet, streamline our operations globally to return to a more agile operating model, improve margin and logistics as a percentage of revenue and reduce our cost base to return to profitable growth.’
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For Money Morning