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City Chic says early part of FY21 results look positive

Clothing retailer City Chic said it has continued to deliver positive comparable sales growth in the early part of FY21 and added that its Avenue customer base in the US shows continued resilience.

The company said the current market conditions are favourable to explore opportunities to expand the global customer base. 

“Following the acquisition of Avenue in October 2019, our online channels now represent two-thirds of our global business,” said Phil Ryan, City Chic CEO and managing director.

Ryan said in the past 12 months they have grown their active customer base by 278,000 and expanded their product offering into the everyday fashion category with Avenue and launched the intimates and playwear brand Fox & Royal which was developed from their acquired Hips & Curves brand.

“Our focus is on leveraging our offering across channels and regions as we continue to scale our business globally,” he said.

“The acquisition of Avenue has been successfully integrated within our operating structures and supply chain, with trading exceeding our expectations,” Ryan said.

“The success of this acquisition, which was earnings accretive in FY20, provides a blueprint for the potential purchase of the Catherines brand, which targets value-conscious women, but skews to different US states.”

The fashion retailer posted a 31 per cent increase in sales revenue in the 52 weeks to June 28 to $194.5 million with comparable sales growth of 0.4 per cent. 

It posted a global customer base growth of 72 per cent to 663,000 active customers with an online penetration of 65 per cent of total sales compared to the 44 per cent in the previous corresponding period. Underlying EBITDA was at $26.5 million, representing 6.6 per cent growth compared to FY19.

Normalised operating cash flow was at $20.9 million compared to FY19’s $21.5 million.

The company’s online website has grown globally posting 113.5 per cent growth compared to the previous corresponding period.

According to City Chic, its strong balance sheet has a net cash of $3.9 million as of June 28 and a debt facility of $40.0 million; further strengthened with $111.1 million equity capital raise post year end.

Sales in Australian and New Zealand fell by 4.8 per cent with sales growth of 9.9 per cent in the first half, followed by a 21.5 per cent fall in the second half driven by the impact of Covid-19 and store closures. ANZ trade improved with the reopening of stores, with sales down 26 per cent from the previous corresponding period in June 2020 compared to 47 per cent down from the previous corresponding period in April 2020.

US online websites, City Chic USA, Avenue and Hips and Curves, contributed sales of A$65.2 million in FY20 compared to A$10.7 million in FY19, largely driven by the expanded customer base from the Avenue acquisition for a 37-week contribution.

Ryan said the company is very well capitalised and remains focused on the execution of various growth initiatives including the potential acquisition and integration of the Catherines brand; improve engagement with, and experience of, the Avenue customer base, and migrate store customers to the online channel.

The company also announced it plans to continue expansion of lifestyles and categories online, expand into Everyday Fashion product stream in the southern hemisphere, drive brand awareness in the northern hemisphere, including adding new partners and building on trial in the UK and Europe, and continue to invest in enhancing customer touchpoints.

“In the early part of FY21, City Chic is pleased to advise that the company has continued to deliver positive comparable sales growth and the Avenue customer base in the US continues to be resilient,” Ryan said.

“However, City Chic acknowledges the economic impact caused by Covid-19 globally and the uncertain outlook for consumer demand.”

City Chic USA website’s strong growth momentum in the first half slowed and gross margins were heavily impacted in the second half due to Covid-19 and the drop in demand for City Chic’s major dress category in the US

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