ASX News Live | ASX Lower; Lithium Stocks Fall, BWX CFO Resigns, Pilbara Enters JV with Calix

Women’s apparel retailer City Chic Collective is down 45% since Friday.

The reason? A gloomy trading update and sales outlook revealed at the annual general meeting held last week.

FY23 year to date trading update

City Chic’s sharp fall followed a soft year to date trading update from City Chic.

FY23 YTD revenue was down 2%, hurt mostly by reduced sales in the Americas. Revenue in the Americas region fell 12% year to date on the comparable period in FY22.

CCX management did point out FY23 YTD revenue is still up 48% on FY21.

CEO Phil Ryan said the trading conditions are tough — leading the retailer toward margin-shrinking promotions to rev demand:

“Demand has been volatile, and the consumer is looking for promotion as a reason to buy. The competitive landscape, especially in the Northern Hemisphere, has intensified as all businesses promote aggressively to capture the limited dollars she is prepared to spend.”

Ryan admitted competition is fierce in the USA which is leading ‘to much earlier Black Friday-like promotional levels’.

This, in turn, led to the ‘largest regional decrease in margin year on year.’

Consumer demand

For City Chic chairman Michael Kay, the biggest unknown for FY23 is consumer demand. Will consumers still want to buy City Chic’s apparel in FY23 at the same level as FY22 or FY21?

“Perhaps the greatest unknown we have to deal with in FY2023 is consumer demand. Most published metrics, commentaries and surveys indicate that consumer confidence is low, that inflation and interest rates are eating into disposable income and that consumers are consequently taking steps to protect their personal and family balance sheets and cash flow. Some commentators are saying these adverse conditions will persist throughout 2023
and into 2024.

“Customers are carefully choosing what to spend their money on and are looking for promotional offers. These are challenging trading conditions but we believe we have the right range in the right markets at the right prices to trade successfully through whatever externalities we encounter.”

City Chic managing inventory — but how well?

Over recent trading periods, City Chic picked up excess inventory it is struggling to offload. With discretionary spending shrinking, this excess inventory is causing management headaches.

City Chic is sitting on too much product at a time of reduced consumer demand. Discounting is a painful way to ‘right-size’ its inventory but margins will suffer.

CCX chairman admitted as much in his AGM address:

“The real issue for us to deal with in FY2023 is temporary margin compression driven by competition for reduced demand, together with transitory logistics costs in the Northern Hemisphere. Phil will provide more detail in his presentation, including the measures we are taking to mitigate the impact of these pressures.”

City Chic expects inventory to be in the range of $168-$174 million at the end of the first half.

City Chic Collective and QPM lead the All Ords in losses in late afternoon trade:

• City Chic Collective (ASX:CCX), down 30%
• Queensland Pacific Metals (ASX:QPM), down 25%
• Electro Optic Systems (ASX:EOS), down 15%
• Talga Group (ASX:TLG), down 14%
• Bubs (ASX:BUB), down 13%
• 88 Energy (ASX:88E), down 10%
• Arafura Rare Earths (ASX:ARU), down 10%
• Marley Spoon (ASX:MMM), down 9%
• Redbubble (ASX:RBL), down 9%

 

Beauty retailer BWX (ASX:BWX) has delayed the release of FY22 audited financial statements and announced the resignation of its chief financial officer.

BWX stated in October 28 that it will release the audited financial statements by Monday, November 28. However, today the retailer said it needs more time to resolve audit issues.

In a brief statement, BWX explained:

“The Company advises that it has engaged strategic advisors to assist with procuring additional debt funding, which will allow BWX to execute its restructure plans, address its rundown of inventory and continue the sale of its non-core assets in a timely manner. While this process is well advanced, it will take time to evaluate the offers received. Until that process is further advanced and certainty of funding is secured, the Board is unable to finalise the FY22 audited financial statements. The Company confirms that its principal bank lender remains supportive. Accordingly, the Board has made the decision to further delay the release of its FY22 audited financial statements.”

The retailer also announced the immediate resignation of CFO Efee Peell who commenced the role in March 2020. BWX said Ms Peell decided to step down to focus on her recovery following an extended period of leave for health reasons.

 

‘I draw your attention to the curious incident of the dog in the night-time.’

So goes one of the most famous scenes in Sherlock Holmes.

The Inspector replies to the great detective, ‘The dog did nothing in the night-time.’

Holmes replies:

‘That was the curious incident!’

Sometimes it’s what doesn’t happen, rather than what does, that matters.

Case in point: retailer City Chic is not selling as much as it positioned for.

Now it’s stuck with too much inventory and has to discount to shift what it can.

The stock got hammered on Friday after the company told the market a more detailed version of the above.

Why does this stick out like the silent dog in the nighttime?

Because most other retailers are reporting cracking results!

Just in the last few weeks, I’ve seen positive updates from Myer Holdings [ASX:MYR], Accent Group [ASX:AX1], Cettire [ASX:CTT], and Super Retail Group [ASX:SUL].

They’re cashing in on the surprising strength in consumer spending.

The Australian Financial Review reports that the Black Friday shopping extravaganza is on track to set a record.

I did my bit and ordered a Nintendo Switch for the seven-year-old.

The point around this is that it’s not some airy-fairy observation.

There are tradeable moves that spring from this!

Cettire, for one, rallied 189% from early October to mid-November.

Stone the crows!

Why so dramatic?

A major part is that the market became way too bearish about the future economy when it collapsed back in June. That set terrible expectations about future results.

Now those results are coming out…and are much ‘less bad’ than assumed. Shares rally when this happens.

Hello!

There are stocks still all over the floor. The ASX 200 has indeed rallied up in recent trading.

But this is being dragged up by the current strength in iron ore miners and big banks (another indicator that things aren’t that bad).

A lot of the stocks lower down in market cap are still super cheap, relative to where they were last year.

All I can do is urge you to start kicking over ideas and opportunities while this remains the case.

Here’s a bit more motivation for you…

Check out the weekend front page of the Australian Financial Review below:

Market experience tells me when a sentiment appears in the mainstream press like this, our instinct should be to go the other way.

Yes, I’m suggesting the contrarian position right now is to be bullish.

I’m not saying I can predict where the market goes any better than you can, but being overly negative is unlikely to lead to material profit.

https://www.dailyreckoning.com.au/stock-wins-in-an-unlikely-sector/2022/11/28/

Australian retail sales fell 0.2% in October, the first monthly fall of the year in retail sales. Retail sales rose 0.6% in both August and September.

Australian Bureau of Statistics’s Ben Dorber commented:

“The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending.”

“Turnover fell in all industries in October except for food retailing, which rose 0.4 per cent boosted by flood-related spending in parts of Australia and continued high food prices.”

“Cafes, restaurants and takeaway food services recorded its first fall since January 2022, down 0.4 per cent and other retailing fell 0.2 per cent.

“Elevated post lockdown demand and price increases had boosted sales throughout the year in cafes, restaurants and takeaway food services. A slowdown in growth in recent months, capped off by the fall in October, shows trading conditions continued to normalise.”

Source: ABS

And there it is, the first genuine pullback in retail sales since the pandemic. Much weaker than market expectation and materially erodes the ongoing spending narrative and Australia households are some how different. Should this continue the #RBA's job is largely done pic.twitter.com/vrG9RjHlYI

— Alex Joiner 🇦🇺 (@IFM_Economist) November 28, 2022

 

The island of Manhattan was famously sold off by indigenous inhabitants for US$24 worth of beads and trinkets.

Not a bad deal for the wily Dutch.

But it wasn’t obvious for a while.

The US’s agricultural resources — grains, tobacco, dyes, and cotton — were mostly produced inland or in the southern states.

And New York had no vast gold deposits like South America, either.

The main advantage it had was its natural harbour — a harbour that provided the initial gateway to trade with Europe.

But New York made the most of it.

In 1810, some clever financiers cooked up a scheme to build a canal from the Great Lakes at Buffalo to New York’s Hudson River.

As you can see here, it opened up New York City by ship to the country’s vast interior:

The risky plan paid off.

Commodities from all over the young nation were shipped to Europe through the Erie Canal, with New York collecting the ‘toll’ on the way through.

On the return trip, empty cargo ships would offer cheap passage to immigrants from Europe looking for a better life.

And they came in droves.

The idea of the US and particularly New York — a land of individual freedom and economic opportunity — appealed to millions shut out from such opportunity in their own lands.

But what these immigrants found on arrival was often disappointing.

Greedy robber barons, Wall Street reptiles, corrupt politicians, riots, and civil wars awaited them.

And yet they kept on coming.

Over time, the city adapted to each and every new group and each and every new challenge.

This melting pot of nations, drawn together for a chance at the American dream, became battle-hardened to anything the world could throw at it.

If you could make it there, you could make it anywhere.

During the Gilded Age of the late 1800s, the city became a cultural icon too. The new world’s centre for art, music, and philanthropy.

And by the time the 20^th century arrived, New York was in the perfect position to take over the world.

Thanks to its role as a trading centre, it also became the financial centre of the US. It was home to the New York Stock Exchange and all the major banks.

And over time, as US dominance grew, it became the global financial centre too.

The two World Wars, which bankrupted the European powers, only sped up this process.

In short, control over money is how New York became the city we know today.

But could this era of dominance be coming to an end?

And what will take over?

There’s only one candidate…

https://www.moneymorning.com.au/20221128/the-new-new-york.html

Queensland Pacific Metals (ASX:QPM), developer of the Townsville Energy Chemicals Hub (TECH Project) which seeks to produce nickel and cobalt and alumina, is down 30% after disappointing the market following the release of an advanced feasibility study for TECH.

In June 2020, QPM released an updated pre-feasibility study for the TECH project. The key metrics included:

• Post tax net present value (NPV) of $1.08 billion
• Post tax internal rate of return (IRR) of 24.9%
• EBITDA of $211 million per annum
• Total capital expenditure of $554 million, plus a ‘contingency of $96 million)
• Total operating expenditure per annum of $163 million

How do the new feasibility study results compare?

• Post tax NPV of $2.9 billion for Stage 1 and $5.4 billion for Stage 1 and Stage 2 combined
• Post tax IRR of 15.8% for Stage 1 and 16.8% for Stage 1 and 2 combined
• EBITDA of $577 million for Stage 1 and $1.1 billion for Stage 1 and 2 combined
• Total capital expenditure including contingency of $2.1 billion with an additional $1.8 billion for Stage 2
• Total operating expenditure of $534 million for Stage 1 and $1 billion for Stage 1 and 2 combined

What does Stage 2 refer to?

QPM has frequently said the TECH project can be expanded following the commercialisation of its initial assets under a Stage 1 phase.

Regarding the higher capex estimate, QPM said:

“Global equipment cost inflation has been a major issue in the last 2 years which has significantly affected large-scale resource projects around the world. In compiling this capex estimate, QPM and Hatch have had extensive discussions with vendors with regards to their pricing. From these discussions, the advice from vendors is that this capex estimate has been prepared at the height of the market, and there are now clear signs that manufacturing and equipment costs are now reducing Prior to reaching financial close on its debt facility, QPM will update the capital estimate to ensure it represents current market information . The completion of this Feasibility Study allows debt financiers to commence their technical due diligence.”

 

Philip Lowe, governor of the Reserve Bank of Australia, is currently appearing before the Senate Economics Legislation Committee in Canberra.

You can watch it live here.

Some exchanges between Lowe and the Committee were heated … as the head of the central bank takes flak for recent monetary policy.

Lowe also apologised to mortgage holders who took out loans on the belief the RBA will not raise rates until 2024.

“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in.

“But at the time, we saw that as the right thing to do. And I think, looking back, we would have chosen different language. People did not hear the caveats.

“I thought it was clear … but the community didn’t think it was clear. Well, they thought it was clear we weren’t raising rates until 2024. That’s a failure on our part.”

Women’s apparel retailer City Chic Collective (ASX:CCX) is down 15% on Monday, extending its losses from last week following a disappointing business update revealed in the annual general meeting held last Thursday.

City Chic revealed that FY23 year to date global revenue was down 2%, with the USA segment down 12%.

CCX shares are down over 30% since the AGM.

 

Payment terminal provider Smartpay (ASX:SMP) has released its latest half-year results on Monday.

• Revenue up 68% to $35.4 million
• EBITDA up 119% to $8.1 million
• Net profit before tax up 637% to $2.7 million
• Total transaction value up 132% to $2.3 billion
• Australian transacting terminals up 2,800 (29.5%) to 12,546

Smartpay said the key driver of revenue growth was its Australian acquiring transaction revenues, which hit $26.9 million in the half.

SMP said its share of the terminal addressable market has grown from 3.9% in March 22 to over 5% in 1H23.