Plus-sized women’s fashion retailer City Chic Collective [ASX:CCX] released its latest results summary at the company’s 2022 AGM.
Management applauded rising sales despite current market volatility, with $369.2 million in total sales being up nearly $100k on last year’s $265.6 million.
CCX’s share price fell 26% in the early afternoon and is 81% down from January through to November.
Source: tradingview.com
The year in review for City Chic
City Chic’s CEO Phil Ryan and Chair Michael Kay briefed investors on FY22 trade, addressing apprehension for the year ahead, with volatile conditions continuing to threaten the retail sector.
Mr Kay remarked the last four years have been ‘topsy-turvy’, with challenges beginning with COVID and followed-up by widespread inflation and geopolitical impact straining usual business operations.
City Chic’s results were measured across the last four years:
- Sales revenue grew by 39% (35.2% CAGR in sales growth), with a total of $369.2 million ($265.6 million in FY21).
- 7% CAGR in earnings growth (based on underlying EBITDA and excluding non-recurring costs) — underlying EBITDA was up 11.3% to $47.1 million, a margin of 12.8%.
- Statutory NPAT was up 4.7% to $22.3 million, and Underlying NPAT was up 14.5% to $28.5 million.
- Underlying business expenses of 47.2% were flat in FY21.
- Inventory of $195.9 million has a target of $125-135 million for June FY23.
- The company’s debt facility has been expanded to $60 million, to be repaid over three years.
Mr Ryan acknowledged the year’s results, touching on challenges faced:
‘FY2022 was another strong year for City Chic Collective, with sales growth of 39% and EBITDA growth of 11.3%. This was achieved with store closures, sourcing delays, material cost increases, logistics challenges and demand that has been extremely hard to predict. This illustrates the strength of our team and our business model and the support of our customer for our product range.
‘Our vision to “Lead a world of Curves” progressed in leaps and bounds in FY2022, and we are now a truly global plus size apparel business in what is a fragmented $180bn market.’
Source: CCX
Stormy markets persist for CCX
Due to rampant inflation and inventory woes, CCX decided to pool its money into surplus cash to fund mitigation strategies, allowing for enough supplies while also hedging against inflation.
The retailer has been careful to select surplus stock known to sell ‘year in and year out’, careful to select seasonable options that appeal across regions to sell through its stockpile.
The company has ambitiously pushed for global growth and simultaneously acquired Avenue, Evans and Navabi, increasing cost pressure at around 5% of revenue.
It may take some time to consolidate infrastructure and expansion costs, particularly given the current market.
Mr Kay stated, ‘We are on track to reduce inventory to the guided numbers and consequently, we aim to have zero debt and a healthy cash balance by 30 June, 2023.’
In order to hedge against current market conditions, the fashion distributor has had to focus on a balance between growing profit and reducing inventory.
‘These incentives are a little unusual but the Board believes they strike the right balance and keep management focused on the right things in these very unusual times.”
In FY23 City Chic will continue to focus on expanding its global market share as well as further marketplace partnerships across its channelled regions.
CCX believes its balance sheet to be ‘sound’, inventory to meet guidance, and is waiting for markets to normalise, even while ‘some commentators say these adverse conditions will persist throughout 2023 and into 2024.”
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