City Chic’s (ASX:CCX) shares plunge over 23% post mixed trading update

Highlights

• City Chic shared trading and 1HFY23 outlook on the ASX today (20 December).
• Following the news, shares of City Chic were trading in the red, down 23.305%.
• The company’s global revenue for 1HFY23 was 7% lower to AU$157.1 million.

Today morning (20 December), Australian retail clothing company City Chic Collective Limited (ASX:CCX) witnessed a huge drop of 23.305% on the ASX. This decline appears to be triggered by the company publishing a mixed update on trading since its annual general meeting (AGM) on 25 November 2022.

The group hinted that the Black Friday, Cyber Monday, and Christmas trading season, concluding on 1 January 2023, would have a substantial impact on its 1HFY23 earnings.

Following the ASX announcement, one share of City Chic Collective was valued at AU$0.452 as of 1:36 PM AEDT, 20 December 2022.

A glance at City Chic’s trading update and 1HFY23 outlook

According to City Chic, market circumstances have remained unstable since the AGM, and overall demand has fallen short of projections. Global revenue for the company dropped by around 7% to AU$157.1 million from the prior corresponding period (pcp). However, revenue in 1HFY23 was 38% more than it was in FY21.

Since the AGM, City Chic has intensified its promotional activity to boost demand in line with the market, significantly compressing its gross margin. As stated in the ASX filing, the combined effect of decreased revenue and gross margins and higher fulfilment costs in accordance with the AGM update is anticipated to result in a slight underlying EBITDA loss for 1HFY23.

Despite the strain on demand, City Chic is confident that inventory will be at the lower end of the range of AU$168 million to AU$174 million (as quoted during AGM) at the 1HFY23 end, subject to demand and foreign exchange movements.

City Chic’s revenue by region and channel

ANZ: For the ANZ region, City Chic’s year-to-date (YTD) revenue remained flat at AU$73.2 million, while stores revenue climbed by 35% on pcp and 10% on FY21. The online YTD income was up 16% from FY21 but down 18% from a strong pcp.

Americas: Due to rising pressure on consumer demand and cycling a very good pcp result, the company's YTD revenue in the Americas fell 14% to AU$64.9 million. It was 32% greater than in FY21, though.

EMEA: Due to market conditions and greater levels of returns, City Chic's YTD revenue in EMEA was 5% lower at AU$19 million.

Partners: The partner businesses kept up their remarkable growth during 1HFY23, albeit at a lower rate; YTD revenue across all areas was AU$17.1 million, up 111% from the prior year.