‘”CURV 2Q22: Sales up slightly yet GMs down due to higher...

‘”CURV 2Q22: Sales up slightly yet GMs down due to higher promotions & costs

…Net sales US$1.26-1.30bn (was US$1.3-1.365bn); Adj EBITDA US$160-

175m (was US$195-220m); and capex US$30-33m due to technology investments & 34

new stores (was US$30-35m, ~35 new stores).”

“UBS Comment #1: Promotions into 3Q22 yet lower promotions planned ahead -

Promotions to clear seasonal inventory were the key driver of lower gross margins for CURV in 2Q22, with a focus on clearance in the first part of 3Q22 to maintain pressure on gross margins. For CURV, inventory at the end of 2Q22 was up only 40% vs pre COVID 2019, with sales up 32%. In comparison, since 12mth end 1H20 (pre COVID), CCX sales are up 107% with inventory up 912% (and even at mid-point of the plan announced at FY22 result to reduce FY23E inventory to A$125-135m, it would be up 253%), with the CCX plan to reduce inventory with limited discounting a focus for investors and a different approach vs CURV. Looking forward, CURV is seeking to refine its marketing & promotional strategy to reduce site-wide promotions, replacing them with more category focused promotions based on elasticity. This change from CURV would be a positive as promotional intensity across plus size retailers has been elevated recently which is making the competitive environment more difficult for CCX.

UBS Comment #2: CURV guides 2H22 sales to be flattish on pcp

The FY22 sales guidance range implies 2H22 sales -5% to

+2% vS pcp, with CURV noting it did not expect a dramatic improvement in either traffic or conversion. However, it does have a strong inventory position, with the inventory bought down 7% ($) and down 11% (units). Stores were reiterated as important for CURV, with store customers spending 25% more in yr1 and 60% converting to omni-channel by yr2, while net promoter scores are highest in stores.

Valuation: Unchanged at A$2/share in 12mths time, Retain Neutral rating

CCX is trading at a 1yr fwd P/E multiple of 11.3x, a 31% discount to the ASX Small Ordinaries.”

2022 CCX sales: 370m
2023 Forecast CCX sales: 389m