City Chic Collective Returns to Profitability Despite Ongoing Volatility in US Market

City Chic Collective (ASX: CCX) has reported a return to profitability after a reduction in US sales due to tariff uncertainty and associated volatility dented its performance.

The company’s global sales revenue for the 12 months to the end of June hit $134.7 million (up 2.3% on the previous corresponding period) and it expects to deliver an underlying EBITDA of between $6m and $6.5m, marking a significant turnaround from last year’s $8.4m EBITDA loss.

Revenue from 78 stores across the Australia-New Zealand region was up 8.3% to $105.8m as sales grew by 15.2% in the second half, while the US numbers were down 14.9% to $28.9m.

Online Sales

The 17.8% increase in online sales, with its largely variable cost base, did not have the same positive EBITDA impact to offset the lower-than-expected performance in store sales, which are subject to a largely fixed cost base.

Inventory fell 12% to $27.2m, reflecting disciplined stock purchase controls and positioning the group with a fresh product assortment heading into the new year, while the trading margin for the 12-month period was up 3.6 percentage points.

City Chic’s cost of doing business improved materially from $96.5m in FY24 to $84.4m, reflecting greater labour and fulfilment efficiencies and reductions in other operating expenses.

The group ended the period with $8m in cash and $5m drawn from its $10m debt facility, which remains in place until December 2026.

Transformation Efforts

Chief executive officer Phil Ryan said the annual results reflected transformation efforts in the face of ongoing market volatility and persistent macroeconomic headwinds.

“The US has remained volatile, with ongoing changes in foreign trade policy directly impacting demand and resulting in our revenue and EBITDA being slightly below our guidance,” he said.

“Our growth has been lower than planned, with the expected uplift from recent interest rate cuts and improving consumer sentiment yet to materialise to the extent anticipated.”

Better Products

The company’s recovery was underpinned by better product quality, an improved fashion range and a stronger customer proposition.

“We have listened closely to what our customers have been telling us and have been pleased by their response to our new collections,” he said.

“We are making strong inroads in our margin improvements and cost base reductions and are now focused on driving revenue growth to deliver sustainable profitability,” he said.

“Making these improvements has not been easy and I believe we are only halfway there on this journey but with our simplified structure and significantly lower cost base, we are well positioned to take advantage of more favourable market conditions when these return.”

US Strategy

City Chic has recently introduced various new strategies to keep its US business strong.

“We are working closely with our suppliers to share the impact of the tariffs and have cautiously recommenced limited purchasing in the US to replenish best selling items and deliver newness,” Mr Ryan said.

“We believe we have turned the corner and we are looking ahead with clarity, confidence and a focus on delivering the best product assortment for our customers.”