How has ASX 300 listed City Chic share price performed post FY20 results?

Summary

  • Amid the COVID-19-induced lockdowns, many retailers had to temporarily close their physical stores which had a massive impact on their business activities.
  • Global retailer, City Chic Collective Limited, however, managed to deliver a considerable net profit in this challenging environment, aided by improved online sales.
  • Revenue increased by 31% while Global customer was up by 72%.
  • At present, the Company is well placed, and in FY2021, it intends to stay focused on the execution of several growth initiatives.
  • City Chic share price ended ~1% higher on the day of the results announcement. The stock was trading at A$3.190 at the time of writing, down 4.204%.

ASX 300 listed Company, City Chic Collective Limited (ASX:CCX) has reported a 31% growth in the sales revenue and delivered a statutory PBT of A$16.7 million in FY2020 (period ended 30 June 2020). Despite the recent challenges faced by the business, the team as well as the CCX customers plus the global community, the commitment and drive of the Company’s people helped in delivering another transformational year. Even though COVID-19 impacted business, the business traded profitably and achieved top-line growth of over 30%.

Regardless of the Company’s impressive performance amid challenging COVID-19 environment, the shares could not do that great on ASX. There was a growth of 0.909% in CCX share price on 27 August, settling at A$3.330. The stock was trading at A$3.190 on 28 August 2020 (at 3:13 PM AEST), down 4.204%. In the last six months, the shares have provided a return of 14.83% while a decent 13.27% return in the previous three months.

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About the Company:

City Chic Collective Limited is a global omni-channel retailer that specialises in plus-size women’s apparel, footwear, and accessories. The Company’s channel represents 2/3rd of its international business. In the last 12 months, City Chic’s customer base has increased by 278,000. The Company also expanded its product offerings into the everyday fashion category with Avenue. CCX launched the intimates and playwear brand Fox & Royal, which was formed from CCX’s acquired Hips & Curves brand.

FY2020 at a Glance:

During March 2020, the Company highlighted that the ongoing spread of coronavirus was impacting consumer spending and sales. From 27 March 2020, post the announcement related to lockdown in the country, CCX had temporarily closed its ANZ stores. It implemented various cost reduction and working capital management initiatives.

On 25 May 2020, City Chic announced the staged reopening of stores. The profitable trading during store closure was supported by a 57% growth in the online sales coupled with the strong Avenue customer base.

On 15 June 2020, the Company also discussed with the landlord to reduce the rent during the store closures and market appropriate go-forward rent. CCX also closed 14 holdover stores when it could not reach an agreement on appropriate post-COVID-19 rents.

In early July 2020, the Victorian State Government reinstated restrictions about the increasing COVID-19 cases in metropolitan Melbourne. Hence, CCX also had to close its 20 stores in Melbourne temporarily to protect the health and safety of its people and customers.

CCX closed four stores in Auckland during the mid of August 2020, when the New Zealand government-imposed restrictions in Auckland.

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Now, with this background, let us have a quick look at FY2020 results:

  • Revenue from ordinary activities increased by 31% to A$194.492 million.
  • Profit from ordinary activities after tax attributable to City Chic Collective Limited owners declined by 35.8% to A$9.160 million.
  • The global customer base grew 72% to 663,000 active customers.
  • Online penetration at 65% of total sales.
  • 42% of the global sales were in the northern hemisphere propelled by Avenue’s acquisition in the US.
  • Normalised operating cash flow was A$20.9 million.
  • CCX has a strong balance sheet with net cash of A$3.9 million at 28 June 2020. It has debt facility of A$40 million, which has strengthened with A$111.1 million equity capital raise post the completion of FY2020.

SOurce: Company's presentation

Operational Overview FY2020:

  • Improved customer experience with the launch of a new global eCommerce platform and new Customers Relationship Management system.
  • Increased online product offering which includes the launch of Fox and Royal.
  • Consolidated the US warehouse & logistics solution while reducing activity levels due to COVID-19. CCX has one warehouse in Dallas which would drive cost efficiencies & allow cross-selling throughout the complete US customer base.

Outlook:

In the early FY2021, City Chic has continued to deliver positive sales growth. The Avenue customer base remains resilient in the US. At the same time, the Company also highlighted the economic impact due to COVID-19 and about the uncertain customer demand.

In the present time, the Company is well placed to capitalise and stays focused on the execution of several growth initiatives. Some of them include:

  • Possible acquisition & integration of Catherine brand.
  • Enhance engagement with and experience of the Avenue client base and transfer store client to the online channel.
  • Continuing review of store portfolio with the roll-out of new stores along with the conversion to larger format stores where store economics are proper.
  • Ongoing extension of lifestyles and types online.
  • Develop into Everyday Fashion product stream in the southern hemisphere.
  • Client acquisition and driving brand awareness in the northern hemisphere, which includes the addition of new partners & building on trials in the UK and Europe.
  • Continuing investment to increase client experience.

Conclusion:

It is true that amid the challenging times where most of the stores were closed temporarily as per the guidelines of the government, CCX managed to yield profit during the period. However, Australia continues to witness a rise in COVID-19 cases, especially in Victoria, while cases were also found in New Zealand. As a result, the Company had to close some of its stores again.

While approximately two-thirds of City Chic’s sales are from the online platform, the prevailing uncertainty concerning COVID-19 duration could impact the Company’s share price.

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