City Chic mess deepens, eyes first-half lossCarrie LaFrenzSenior...

City Chic mess deepens, eyes first-half lossCarrie LaFrenzSenior reporterJan 20, 2023 – 12.46pmSaveShareSales at women’s specialty fashion retailer City Chic Collective slumped in the December half, leaving it with excess stock that had to be discounted in a competitive market and pushing the retailer into an expected first-half loss.The group operates many brands, including City Chic, Avenue, Evans, CCX, Hips & Curves, Fox &Royal and Navabi, catering to the plus-size women’s apparel and footwear market.City Chic shares have tumbled nearly 90 per cent in the prior 12 months.

As The Australian Financial Review flagged in December, the mess at the company has deepened after a series of downgrades. It said on Friday it expected to post a loss of between $2.5 million and $4 million in the 26 weeks to January 1 – worse than what analysts predicted.

[“Mess”]

Sales for the first half are expected to be down 8 per cent from a year earlier to $168.6 million, with volatile trade through key events Black Friday/Cyber Monday, Christmas and Boxing Day sales, which led to steep discounting and promotions to move aged stock that crunched its gross margins.The stock is down about 86 per cent to 67¢ over the past year. On Friday, shares fell 6.7 per cent, giving up gains made earlier this week following news that AFR Rich Lister Brett Blundy became a new substantial shareholder.

RELATED QUOTESCCXCity Chic$0.660 -7.69%1 year1 dayJan 22Apr 22Jul 22Jan 230.0003.0006.0000.455 at 3/1/23Updated: Jan 21, 2023 – 6.54pm. Data is 20 mins delayed.View CCX related articles

AdvertisementMr Blundy is one of the biggest names in Australia’s retail sector, backing the likes of Bras N Things, Lovisa and Honey Burdette, which has made him a fortune.City Chic said on Friday inventory was expected to be between $163 million and $164 million at the end of the half – below the range it guided at its annual meeting. But it confirmed that it is on track to trim the inventory balance to $125 million to $135 million at the end of the financial year.Chief executive Phil Ryan said the company was on track to deliver its strategic logistics initiatives, and continue to focus on cost management, after securing to help from its lenders getting its covenants eased.“With the support of our lender, we have amended our debt facility in line with our changing business needs. We remain extremely confident in executing on our strategies and returning to profitable growth as these cyclical headwinds unwind,” he said.Wilsons Advisory analyst John Hynd noted deep discounting can have a detrimental impact on brands and makes in tough to dramatically improve revenue over time. He believes that a private equity buyer would pay up to $142.6 million for City Chic under a leveraged buyout.

.AdvertisementCiti analyst Sam Teeger said in a note earlier this week the arrival of Mr Blundy on City Chic’s register is positive.“While City Chic’s interim result next month is unlikely to be good, in our view, Mr Blundy’s new shareholding in City Chic suggests there may be upside to business performance over the medium to longer term,” he said.He said since City Chic does not have bricks-and-mortar stores in the US, it could be at a competitive disadvantage compared to US and UK competitors who have a physical store presence. This would also decrease City Chic’s addressable market in the US from $US49 billion ($70.8 billion) to $US38 billion, he added.City Chic is a global online and bricks-and-mortar retailer with a network of 90 stores across Australia and New Zealand and websites operating in ANZ, the US, the UK and Europe. The retailer will announce its audited financial results on February 27.