Plus-size retailer City Chic has narrowed its full-year guidance amid ongoing headwinds in its United States market, where sales were down 22.5 per cent in the first half of FY25.
The US sales fall dragged down total revenue for the retailer by 3.6 per cent, offset by a 2.8 per cent lift in sales for City Chic’s Australia and New Zealand market – the company’s larger market.
City Chic also reported a 29.1 per cent fall in partners revenue for the first half, reflecting a challenging prior period, which included the company’s now-divested Avenue business’ inventory sales.
Despite challenging sales, City Chic’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) swung to green, hitting $3.5 million for the first half. This is up from an EBITDA loss of $5.2 million for the same half in FY24.
The company’s cost of doing business (CODB) declined to 54.4 per cent of sales – down from 62.4 per cent last year, primarily reflecting efficiencies in labour and fulfillment costs according to City Chic.
The sales momentum continued into the first eight weeks of the second half, with City Chic reporting that its total trading revenue was up 25 per cent compared to the same period last year.
The ANZ market was up 30 per cent, with all channels reportedly performing well. The US market was also up by 9 per cent, but CEO and managing director Phil Ryan said the market continues to show volatility, with the trading margin below expectation “as we had to drive end-of-season clearance harder than expected to sell-through winter product.
“The USA is now my main focus as there remains a material opportunity in this market that will require time to deliver,” Ryan said.
Given the remaining USA volatility including higher-than-planned USA clearance in Jan-Feb and an increase in Amazon marketing, partly offset by additional cost savings, City Chic thought it prudent to amend and narrow its guidance to sales of $137 million to $147 million and EBITDA between $8 million and $12 million.
The new sales prediction is slightly lower than its original guidance given in August 2024, when the company was projecting between $142 million to $160 million and EBITDA of $11 million to $18 million.
Overall, Ryan said its turnaround over the first half “demonstrates the effectiveness of our strategic actions.”
Ryan added that the ANZ business in particular has shown continued improvement throughout the half, supported by a strong holiday trading period which delivered 9 per cent sales growth. Comparable store sales for the half were up 7.5 per cent and City Chic’s websites grew 5.1 per cent.
“While the USA website performed largely in line with last year, comparable sales were challenging for the USA business this period given the slower than anticipated economic recovery and the exclusion of Avenue branded products in Partner revenue.
“The 25 per cent growth in City Chic branded products through our website and partners at materially higher gross margins highlights the opportunity for our brand in the market.”
The turnaround over the last year has also helped City Chic accrue more high-value customers, which Ryan said now makes up 53 per cent of its 466,000 customer base. There is also a newness in its ranges, which Ryan said is driving higher margins and increased average selling princess.
He said the success of its ANZ range bodes well for the Northern Hemisphere summer.